Affect My Credit Score

May 16th, 2010

Question:

I paid an American Express bill three months late. The amount was $46,000. How much did I hurt my credit score?

Answer:

Many readers send me questions regarding their credit scores. Usually the question is posed as, “If I take action X, what will the impact be on my credit score?” Unfortunately, credit scores are not like sports where scoring a goal results in a known number of points or rules infractions result in defined penalties.

If you have a pristine credit score in the 800s, any misstep however slight in your payment history will result in a greater impact on your credit score than if you have a credit score in the low 600s. Therefore, if you have a high credit score, and no other blemishes, it would be better for you to contain any damage as quickly as possible. This is especially true if you have immediate plans to apply for a loan, rent an apartment, or apply for a job where the employer has a policy of doing credit checks on employees.

However, if your credit score is already damaged, there will be little if any impact to your credit score if you settle a debt for less than the full balance, become delinquent on an account, or “max-out” a credit card.

For more detail on how credit scores are calculated, see the Bills.com resource FICO Score Calculation.

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