News & Resources

Late payments put consumers at risk

Jul 16, 2012 Walt Wojciechowski

The economy is still struggling, but it seems consumer confidence rose slightly during the first quarter of 2012. Citing data from consumer credit reporting agency TransUnion, The Huffington Post reports that the rate of payments at least 90 days overdue during the first three months of 2012 dropped from 0.78 during Q4 2011 to 0.73. This follows a fairly steady path of declining delinquency rates since the end of 2007. "We are now seeing that, when given a choice, consumers are overwhelmingly paying their bankcards before they're paying their mortgages," Charlie Wise, TransUnion's director of research and consulting, told the news source. Credit card debt is still a mixed bag. For instance, borrowers averaged $4,962 in debt between January to March - down 4.7 percent from Q4 2011. However, it was still up 6.1 percent compared to Q1 2011. The rise can be attributed to people holding back less on spending, whether due to optimism about the economy or because they're simply sick of being frugal. Or perhaps it's because banks are making it easier for them to spend? The number of credit cards issued by banks over the past year has increased - as have institutions' tendencies to offer credit to subprime borrowers (those with scores between 501 and 640). Cards have typically been reserved for those with scores between 900 and 990.
The news source notes in a separate article that subprime consumers more prone to late payments may be at risk for serious credit score damage. Citing a study conducted by the Fair Isaac Corporation, the media outlet found that a late payment can cause as much as a 90 to 110 point drop on a FICO score of 780 or higher. This black mark will remain on a credit report for seven years.
There is some hope, though. If a payment is only slightly late, there's no need to panic. "The first thing to note is that most lenders do not report missed payments until the account is 30-plus days past due," Anthony Sprauve, director of public relations for, tells the news source. "Technically [for minimally late payments], and fees and interest charges may apply. But in most cases, this late payment would not be reported by the creditor to the credit reporting agencies (CRAs)." In addition, consumers that are usually up-to-date with their payments are less likely to be penalized for slightly late payments, as larger card companies have analytics models that determine timely payers.