Missing a repayment can be concerning, particularly if you're trying to grow your credit score so you can get better access to loans. But the good news is, if you catch a missed payment early, it's easy to correct, and often you can do so without having your score impacted.
But first, are you sure it's just a missed repayment? There's a big difference between a default and a missed payment in terms of your credit history. Defaults are when, after several missed payments, the initial agreement you signed with a provider is considered broken. At this stage, a debt collection agency is called in to collect any money owing.
It was just the one payment date I missed — so what do I do now?
The first thing to do is get in contact with your credit provider. They're the ones you talked to about taking out the loan, credit card or another payment type. It might pay to ring them first — you'll want to sort your missed payment out fast to avoid any complications.
Once you've got a hold of your credit provider, tell them you've missed a payment. Depending on the circumstances, you might work out a new payment arrangement, which you feel able to meet. You'll also ask to see if you can avoid having the missed repayment recorded on your credit history, as this will prevent your credit score from dropping.
Why is that important again?
Credit scores are a number determined by all your financial behaviour, such as paying (or not paying) bills, credit cards and loans—everything you do on credit impacts this number, either for bad or good. When your score dips below a specific 'range', you become less attractive to credit providers, which means less chance of securing good credit deals, and low interest, in future.
Can I improve my credit score once it drops?
Credit scores change all the time — it just takes time. So while missing a payment or defaulting is terrible for your credit score, a good track record of repayments will improve it — just not instantly.
For at least five years, details such as missed payments are also recorded and kept on your credit history. Your credit history is what lenders or banks might want to look at for more information on you as a borrower. The good news is that you can often override something like a missed payment long before it falls off your credit history by improving your score with reasonable repayments.
Can I avoid getting my missed repayment recorded?
While we can't promise anything, often calling your credit provider straight after a missed payment can help. Together you can arrange a new repayment plan, removing the missed repayment in the process.
If not, there is one other thing you can do — ask for a goodwill adjustment letter. This is a bit more of a process, but it's pretty straightforward. Just explain why you were late with your repayment, and ask whether you can remove the missed repayment from your credit history.
I want to make repayments but find it hard to budget.
Learning to juggle payments is tricky — which is why we cover the subject in detail in another blog.
Missing a repayment is easy to fix — ring up your credit provider to sort out a new payment. If you're struggling with your current repayment process, discuss another way to meet your repayments based on what you can afford.