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How do Missed Car Payments Impact Credit Score?

How do Missed Car Payments Impact Credit Score?

Nobody sets out to miss a loan payment but life happens. We are all busy, we all have a lot going on and it’s easy to miss something when your attention is elsewhere. But how does a late auto loan payment impact your credit score? What happens?

 

Our Smithville auto loans team outlines exactly what happens with missed car payments and how it can impact your credit score.

 

Missed Car payments in Smithville

 

Automatic payments can avoid this type of situation but if they aren’t possible or there wasn’t enough money in your account to cover the payment, missed payments happen.

 

So, what happens if you miss a payment?

 

If you miss a single payment, the lender may wait 24-48 hours and then email or call you to remind you. They may also charge a late payment fee.

 

If you don’t pay within a week to 28 days, the lender will send a missed payment letter outlining the repercussions. Some lenders will also call or email you to avoid further action.

 

If you don’t pay within 28-30 days of the missed payment, your auto loan account will likely officially go into arrears. The lender can also levy more fees and begin charging extra interest on the outstanding amount.

 

Don’t pay within 90 days of that missed payment and the lender may begin legal proceedings.

 

Lenders know life happens and know things get busy. Many of the better lenders will give you a bit of time to pay up if you have missed a single payment. If it’s part of a pattern, they may not be so understanding.

 

Late auto loan payments and your credit score

 

If you miss a loan payment but pay in full within a day or two, it is likely that nothing will happen. You settled the account and all is good. That’s your single strike gone though.

 

If you miss an auto loan payment and ignore the lender’s prompting, the lender will eventually report the missed payment to the credit bureaus.

 

This is when things get more serious.

 

The lender will likely begin default proceedings and ramp up the pressure to pay. Your credit report will now include a missed payment and your credit score will take a hit.

 

How much of a hit depends on your current score. If you have excellent credit, you could see a drop of anything up to 180 points. If you already have bad credit, the hit will be lower.

 

That missed payment note on your credit report could stay in place for up to 6 years. It will have a serious impact to begin with as any subsequent lender will see a recent missed payment and will want to know why.

 

Once you have 6 months or more of on-time payments after that missed payment, it will have less of an impact.

 

It’s always better to avoid missing a payment wherever possible but if you do miss one, don’t wait around. Be proactive. Contact the lender, explain why the payment was missed and settle it as quickly as you can.

 

We will use all our skill and experience to deliver the lowest possible Smithville auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

 

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Categories: Auto Loan

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