Does Paying Bills Consistently Late Affect Your Credit?

The impact of consistent late payments on a person's credit rating largely depends on how late the payments are. Payments that are several months late can sink a credit score. However, even payments that are just a few days late can lead to higher interest charges and bigger debts that also ultimately affect credit scores.

Penalty Rates

Consistent late payments to creditors affect your accounts with those creditors and may lower your credit score. Credit card issuers have the right to apply a penalty interest rate to cardholders' accounts when they pay their bills late. Penalty rates are usually significantly higher than cardholders' regular rates. People who don't pay off their balances each month will accumulate more credit card debt if they have to pay higher interest rates. The amount of debt consumers owe affects about 30 percent of their FICO credit score. Large amounts of credit card debt generally lower people's credit scores.

Credit Reporting

The TransUnion credit-reporting company indicates that creditors usually report their customers' account activity every 30 days. So, delinquent payments usually don't appear on consistent late payers' credit reports unless they're at least 30 days late. However, "The Real Impact of Late Payments," an article written by Dayana Yochim for the Motley Fool financial media company in 2005, says payments that are 30 or 60 days late lower a person's credit score mostly just for the month that they're reported as past due. In such cases, Yochim asserts that the negative impact on a credit score is short-lived if the account holder catches up on payments so that the account is current again.

Long-Term Impact

Late payers who apply for credit cards and loans may have the most trouble getting their applications approved if their credit reports show they've been 90 days or more late in paying other bills. Paying bills that late also can prevent people from opening accounts with insurers and utility companies. According to Yochim, just one payment that's 90 days late can cause long-term damage to a consumer's credit rating. That's partly because creditors and others view people who fall that far behind on payments as much bigger credit risks than other consumers.

Payment Amounts

Consistent late payments potentially cause the same amount of damage to people's credit ratings despite the amounts of the missed payments. Therefore, making a $30 payment 90 days or more late is just as bad for a person's credit rating as making a $100 payment at least three months late. People's payment histories affect about 35 percent of their FICO credit scores. That means a significant amount of the score depends on whether consumers make payments on time rather than the amounts of any missed payments.