For those who crave numbers, for what it is worth, which may be very little, I will share with you my experiences. I have been running my own, extensive Excel FICO model for some time now that includes all aspects of credit score for each category, and one of the categories I have been tracking is the effect of prior late payments on scores. Here is what my modeling and experience has shown. FICO states that lates are 30% of total FICO of 850, leading to a max score of 255 pts for this category, and remain in your scoring algorithm for 7 years. My modeling has assumed that a single “one-down” (30-day late) costs around neg. 12-15 pts initially, and using a straight linear regression over the 7 years that it remains in the CR, the impact drops only about 0.3 pts per months (see table below). Assuning that a “one-down” becomes a “two-down” (i.e., 60-day late), its effect then jumps to around 24-30 pts initially, and again using a straight linear regression, drops off in subsequent months by about 0.6 pts per month. Similarly, if the late then goes to a “three-down” (90 days late), its effect jumps initially to around neg. 36-45 pts per late, with a monthly linear regression of about 0.9 per month.
In general, for example, if you have three TLs, and are late on all three for only one month, you can expect an immediate hit of -36 to -45 pts. If you then miss payments on all three the next month, your hit will then go to -72 to -90 pts, and so on.
In a specific case example of one who had 20 prior lates averaging about three years ago, but had been clean since then. Mr. credit evaluator sits down, assuming the best case, that each was only “one –down’” and now having matured for three years (36 months) from occurence, the hit after three years would still be 20x6.9, or -138 of the total of 255 pts for this category, and with a subsequent monthly future net gain of only around 6 pts per month as all 20 mature beyond the current date. So Mr. Credit evaluator looks at the credit report, in detail.. He then finds that half of these became “two down” a month after becoming only “one down,” and this now amounts to a total hit of 69+137, or -206 of the total possible 255 even after three years. And if it were even worse, if 10 remained only “one down,” 5 had gone “two down,” the next month after being “one down,”and five then went “three-down” the month after being “two down,” the hit even after three years would still be 69+68+103, or a total remaining hit of -240 out of the total of 255. You can do the math for other scenarios, up to -255 max loss.
And the only remaining point I will make regarding late payments is that, regardless of the specific numerical FICO impact, other credit evaluation factors are popilarly used by creditors. One popular scoring method is by category, and is often used for such things as quick “pre-screening offers” Clean and dirty files are the first cut categories. Your file is either clean or dirty. One who has gone “two down” or “three down” is caste by most credit evaluators into a general category referred to in the industry as a “dirty credit file.” Some creditors use models that put those with dirty files into weeding categories separate from those with clean files (i.e., those who have no 60+ lates). And then the human evaluation factor enters. Dirty file people remain so for seven years, and thus this category is semi-permanent. FairIsaac has reported to the FTC that, in their analysis, for example, that one with a dirty file remains at near a 40% risk rate to go dirty again within the next one to two years, even after 3 years from the last dirty. You had better belive that creditors look very seriously at that risk category, which remains with you for seven years, when making any credit decision. FICO score is not the end all. You may successfuly rebuild your credit score with gains in other categories, but lendors look at your credit report, and not just your three digit FICO score. If you have a dirty file, you may expect closer scrutiny, and a possible denial letter that does not reference your FICO score, but rather references your past payment history, regardless of FICO score. Would you lend to someone who is placed in a 40%+ risk category of possible further 60+ lates within the next one to two years, even though their payment history is totally clean over the past three years? Hmmmm..... If your file is dirtied, then that is where you are, even aftter three years of clean credit living!
You may think this is all but a lot of numbers. But THEY look at the stats, and do not look at you face to face. This is how decisions are made in the big silver buildings.....
DONT EVER PAY LATE! DONT EVER PAY LATE! ESPECIALLY OVER 3O DAYS!!!!!!!!!!
Late Payment Lookup Table Assumptions ( per late)
MonthsSince 30Late 60Late 90Late
1 -12.0 -24.0 -36.0
12 -10.3 -20.6 -30.9
24 -8.6 -17.1 -25.7
36 -6.9 -13.7 -20.6
48 -5.1 -10.3 -15.4
84 0.0 0.0 0.0
