Credit Q&A: How Do Late Car Payments Affect My Score?

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Q: How does a delinquent auto loan affect my credit score?

A: When it comes to a first missed payment, an auto loan is no more or less damaging to your credit than any other newly delinquent payment obligation. This means you can generally expect your score to drop by about 100 points, depending on your credit’s current standing.  (Remember, good scores will drop more than bad ones. )

However, once you’ve missed more than one car payment, the stakes get a lot higher as lenders don’t wait very long before repossessing a vehicle the owner can no longer pay for.

“You can miss payments on a credit card for up to a half a year before they'll charge off the account as being un-collectable,” John Ulzheimer, president of consumer education for SmartCredit.com, explains.  “You'll get no such grace period with an auto loan.  Once your auto loan goes two to three cycles past due, you'll be squarely in the cross-hairs of the repo-man.”

If the car does get repossessed, your credit score is going to drop even more dramatically. Ulzheimer estimates that this type of line item, which can stay on a credit report for up to seven years, will turn a 680 into a 585, a 720 into a 580 and a 800 into a 684. 

Also, it’s important to note that this kind of drop will be experienced even when you surrender the car to the lender voluntarily.

“A repo is a repo regardless of the back story,” Ulzheimer says.

Want to know what can and can’t affect your credit score? E-mail your questions to editors@mainstreet.com!

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