When you make a late payment, your credit score takes a hit. But how long does it take for that hit to show up on your credit report?
Late payment information
In Australia, a late payment can show on your credit file if it is more than 14 days overdue. This 14-day period is known as a ‘grace period’ during which credit providers cannot report a late payment to a credit reporting body. If you make the full payment within this grace period, there will be no record of a late payment on your credit file.
However, if the payment remains unpaid after the 14-day grace period, it can be recorded as a late payment in your repayment history information. This information is typically only reported by licensed credit providers such as banks and financial institutions, not by utility or telecommunications companies.
What if you pay the late payment?
If you make the full payment within this grace period, there will be no record of a late payment on your credit file. Keep in mind that if you aren’t able to make the full payment and only make a partial one, it will almost certainly be considered as late.
If you pay the late payment or part of it, the impact on your credit file depends on the timing and amount of your payment:
- If you pay the full amount within 14 days of the due date, no late payment will be recorded on your credit report.
- If you make a partial payment or pay after the 14-day grace period, it can still be recorded as a late payment in your repayment history information.
- Repayment history information stays on your credit report for two years.
- If you pay a late payment that has already been recorded, your credit report will be updated to reflect the payment, but the late payment record will remain.
- If you enter a financial hardship arrangement with your lender, this information will be recorded on your credit report for one year.
- For payments more than 60 days overdue and over $150 you may have a credit default recorded on your credit report.
While paying a late payment can prevent further negative impacts, it doesn’t immediately remove the record of the late payment from your credit report. Consistently making on-time payments moving forward can help improve your credit score over time.
The difference between a late payment and a default
There are key differences between a late payment and a default in the Australian credit reporting system. A late payment is recorded if a payment is made more than 14 days after the due date, can only be reported by credit providers (banks and financial institutions) and stays on your credit report for two years. However a credit default is recorded if a payment of more than $150 is over 60 days overdue, can be recorded by any credit provider (including telecommunications or energy providers) and remains on your credit report for five years.
Impact on your credit score
- A single late payment may have a minor impact if followed by on-time payments.
- Defaults have a more significant negative impact on your credit score and creditworthiness.
It’s important to note that consistently making late payments can lead to defaults, which have more severe and long-lasting consequences for your credit report and score.
