Any negative report is bad for your credit score, but it's hard to rate any one factor as more important than others. The Fair Isaac Corporation, which compiles the FICO rating used by all three credit bureaus and most lenders, says the importance of any one factor depends on the overall information in your report. A late payment or a foreclosure can have a major impact -- or almost none.
Once Late Is Minor
A single late payment on one bill probably won't have much effect on your credit score if it's the first time it's happened and all your other payments are current. If your mortgage is up to date and all the rest of the dozen or so monthly bills are paid up, a single payment a few days late will have minimal impact. It will have more impact if it is 60 or 90 days late.
Your payment history is about 35 percent of your FICO score. If you have a history of late payments, either on the same bill or rotating among bills, or if you run 90 days or more late on payments, you can expect a serious effect on your credit score. A credit score is basically a guide for lenders on how worthy you are. If you're consistently late or repeatedly late on one bill, it is a red flag to your score and your lenders.
The effect of a foreclosure will vary with your overall credit rating. If all your monthly bills are current and you have an unused balance on some credit cards or loans, a foreclosure will drop your credit score, but possibly not seriously. One credit rater suggests it's better to take a one-time hit with a foreclosure than to continue to pile up late payments.
Foreclosure Can Last Seven Years
A foreclosure or similar delinquency will generally remain on your credit record for seven years, but its impact will gradually decline if you keep all your other payments current and don't have a car repossesion or other serious problem. The impact of a foreclosure will be greatest on a high credit score, but that will generally rebound more quickly if you keep other payments up.
Look at Your Whole Score
You have to consider your entire credit score to assess the impact. About 35 percent is payment history, either late or foreclosed. Another 30 percent is amount owed; a foreclosure may reduce that. About 25 percent is how long you've had credit and what type; longstanding credit cards may outweigh a foreclosed loan only a year or so old. The final 10 percent is new credit; you can actually help your score by getting a new credit card or loan and keeping it current.
- My FICO: What's in Your FICO Score-
- My FICO: Can My Credit Score Be Ruined by One Item?
- The Motley Fool: The Real Impact of Late Payments
- CNN Money: How Foreclosure Impacts Your Credit Score
- Canton Rep.com: What Will a Late Payment Mean to Your Credit Score?
- Privacy Rights Clearinghouse: Your Credit Score
Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.