Last October I shared my story on fracturing a bone in my hand while mountain biking. I wore a cast on my hand and wrist for six weeks and finally received the ok from my doctor to stop wearing the cast. I was surprised how stiff my wrist was after being stabilized for six weeks in a cast. Even today, five months later, it is still somewhat stiff and a little sore at times. I’ve talked with others that have fractured a bone in their hand or wrist and most say it can take up to 12 months before it will feel normal again.

The length of time it takes your FICO scores to recover from a fracture or derogatory item on your credit report can also take up to a year or more.

By far, this is the most common question I receive, “how much will a late payment, collection or charge-off affect my score? The amount your score will drop will vary from bureau to bureau and there is not a set number of points for any specific derogatory item since it will depend on the rest of your credit report.

A few years ago, Fair Isaac Company (FICO) shared how certain derogatory items could impact scores. According to FICO the most common credit mistakes could affect your credit score by the following:

- A 30-day late payment can drop your score by 60-80 points when your FICO score is 680 and drop your score by 90-110 points if your score is 780.

- A charge-off or collection can drop your score by 45-65 points when your FICO score is 680 and drop your score by 105-125 points when your score is 780.

- A foreclosure can drop your score by 85-105 points when your FICO score is 680 and drop your score by 140-160 points when your score is 780.

You would think having a late payment on a credit card would have less impact than your mortgage however, the scoring models do not look at the type of account that has the late payment, but only how recent it is so a late payment on a credit card will have the same impact as a late payment on a mortgage. It also depends on the rest of your credit report and the type of accounts you have open. If any type of derogatory item shows up on your credit report, expect your score to potentially drop by 100+ points!

For clarification, a late payment can only report on your credit file if the payment is over 30 days late. Occasionally creditors will report an account as 30 days late when it may have only been 20-25 days late. While they can charge a late fee, they legally cannot report the account as 30 days late. If you feel this is the case, then contact the creditor immediately and provide proof that it was paid within 30 days or less.

The majority of derogatory items can stay on your credit report up to seven years. While it will have some negative effect over the entire seven years, it will have less of an impact to your score once the late payment, etc. is over 24 months old on your report.

If you had just one late payment, I encourage you to contact the creditor and ask if they would do a “one-time courtesy removal” on the late payment or similar to having your doctor repair your injury vs. waiting for it to heal on its own. Most credit card companies, and even mortgage companies will agree to this if you have had good payment history in the past.

And when is the best time to call and ask for forgiveness? Friday of course! People seem to be in a better mood and more willing to work with you.

Like a late payment, collection accounts can potentially affect your score by 100 points or more. Experian, Equifax and TransUnion have changed the way they look at collections and how they affect your credit score. They will reject any reporting of a collection less than 180 days old, which gives you time to pay it before it is reported. Most important, medical collections that are paid or are being paid through insurance will be removed from the credit report.

A sprain to your credit is similar to charging up your credit card balances. Your score will drop for having high credit card balances but not as much compared to a derogatory item. As soon as you pay them down you can improve your score quickly.

At the end of the day, try to avoid the things that will have a negative impact to your score and you will avoid those bumps on the trail.

Jim Kaiser

Branch Manager, NMLS #1721861

Cherry Creek Mortgage, LLC, NMLS 3001