Why is your credit score important and what’s changed?

The effect of one overdue payment will depend on factors like how late it is and how frequently you’ve paid late. As each credit reporting bureau and lender uses its own algorithms, there is no way of saying with certainty the effects of one or two late payments. However, generally, the longer a bill goes unpaid, the more damaging it is to your credit rating.

According to Equifax, if you pay your credit card or loan repayments more than 14 days past the due date, this can be recorded on your credit report as a late payment. This entry stays on your report for up to two years.

If your payment is late by 60 days or more and the amount you owe is over $150, this is listed on your report as a default. Any credit provider, including telco and utility companies, can report defaults and these remain on your file for five years.

Your lender may read too many late payments as a sign of financial stress or poor money management, so might be reluctant to approve your credit application. Also steer clear of making too many applications for credit in a short space of time, as this can give the impression that you’re struggling financially.

Take heart that late payment or any other negative information won’t be there forever. Your efforts to pay off your debts will be recorded on your file, showing lenders that you’re trying to mend your ways.

Always check your credit report before applying for a home loan or any other loan. Get a free copy once a year from credit reporting bureaus like Experian, Equifax and your mortgage broker.