Why is missing a $2 payment the same hit as missing a $20,000 payment?

[techcrium]

Why is it that when you miss a $2 payment, you take the same credit rating hit as missing a $20,000 payment?

Anyways, point was that I had churned some cards, and I thought I paid in full but apparently there was a $2 in interest charge for the next month and I didn't bother logging in until 2 months later and realized I missed a payment for 2 months straight...

[Anonymous]

Assuming both has the ability to PIF, the underlying cause/risk factor is the same, a person who is probably more likely than not, unorganized or irresponsible, or both. Of course missing a $20k payment comes with its own set of additional problems, interest for example, not just interest starting from that missed payment date, but also interest accrued for the 20k during the last grace period in which you just lost by missing the due date.

[Anonymous]

Good question.   Here are some reasons.

(1)  There actually isn't a FICO penalty simply for missing a payment.  The FICO penalty only occurs 30 days after you were late.  So in effect you have to be really late -- not just missing it by a couple days, or even a couple weeks.  You have to be refusing or unable to pay for a substantial period of time.  In effect two payments in a row (if it was a credit card).

(2)  Throughout almost all of FICO's history (during which all the current scoring models were developed) there was no way for it to tell how much the payment was supposed to be for.   It can see what your last reported balance was, but not of that balance how much you were supposed to pay.  The credit bureaus didn't collect this.   So FICO couldn't make this distinction if it wanted to.

(3)  When a reported Day 30 late is the result of a tiny amount due, it's usually much easier to convince a creditor to delete that late from the bureaus.  When you had a 20k payment that you were unwilling or unable to make for almost 60 days, it's much harder to convince them that it was just an accident.  So in practice a late resulting from a $2 bill is less likely to stay on your report than one from a 20k bill.

[Anonymous]

Missing a payment is missing a payment.  The dollar amount is irrelevant.

While one can argue that missing a $2 payment is 10,000x less meaningful than missing a $20,000 payment, someone else can argue that making a $2 payment is 10,000x easier than a $20,000 payment.

Both arguments IMO carry equal weight, so they cancel each other out.  Thus, missing a payment is missing a payment regardless of dollar amount.

[Anonymous]

I concur, Unfortunately BBS is brutally correct.

[codefreak13]

I would say that some lenders would be willing to remove those lates as well as a gesture of goodwill and/or with some goodwill coaxing if they were $2 misses. Very unlikely any lender would if it was $20,000. Risk is risk.

[Anonymous]

I too would imagine that all other things being equal that a smaller missed payment would be easier to get removed via GW than a larger missed payment.  The biggest "thing" of course being equal would be the lender. 

It took me about a year to get a $2.93 missed payment removed via GW by Wells Fargo.  They are notoriously known to be "tough" to crack, so even though the amount was small it took a lot of work.  I'd imagine if the missed payment was larger that I would have had an even tougher time.

[Anonymous]

I would imagine that another big factor in getting a creditor to delete a late is having an otherwise pristine credit report -- zero lates or any other derog on the report, with the profile being several years old.  It's probably easier to sell the creditor on the "it was just a one time accident" theory in that case.

[Anonymous]

Of course setting up your autopay, at the very least for the minimum, things like this would never happen.

[Anonymous]

No doubt about that, CGID.

OM, while I agree that autopay is generally a good thing, it can have its issues.  One of my 4 dirty accounts I actually blamed (in part) on autopay.  It was my mortgage.  For years I didn't pay it on autopay, but did finally set it up.  Several days into the month (due on the 1st) after setting up autopay I noticed the payment hadn't yet come out, which concerned me, so I paid it manually.  A few days later, the autopay came out and it was applied toward principle.  I called the lender and explained what happened and asked for the extra payment to be applied to the following month.  They said no problem, but to disable autopay, as the following month it would automatically take another payment [which wouldn't be needed].  I did just that.  I didn't monitor my account the following month, figuring I "was good" from my double payment the previous month.  The following month I set up autopay again and again it didn't deduct until several days into the month and the account had already gone > 30 days late at that point.  Clean account went dirty.

Had I not set up autopay and just stuck to my manual payments I had been doing for years, I wouldn't have been late.  I know this is an outlier example and quite a "fluke" overall, but just an example I wanted to give as to how autopay can on occasion create a problem.