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How does a late payment fee work in the UK?

In the UK, late payments can significantly impact you. Not only because you’ll have to pay a late payment fee, but also because your credit score will take a hit, making it harder to get approved for credit cards, loans, and mortgages in the future.

Understanding how late payments work and how they affect your credit score is crucial if you want to soften the blow of one.

What is a late payment?

A late payment happens when you fail to make a minimum payment on a bill by the due date specified by the lender or service provider in your contract.

This could be for credit cards, loans, utilities, rent, or any other recurring payment you have agreed to make.

What is the average late payment fee in the UK?

The average late payment fee in the UK for credit cards, loans, bills, and mortgages can vary quite a bit:

  • Most credit cards will charge a late payment fee of £12.
  • Most overdrafts also charge a late payment fee between £1 to £5.
  • Personal loans can vary from £0 (Monzo) to tens of pounds.
  • Mortgage late payment fees tend to be significantly more, usually in the hundreds of pounds.
  • The late payment fee for bills, such as utility bills, can also vary. For example, some providers may charge a flat fee, while others may charge a percentage of the amount that you’re paying late.

The worst part about a late payment, though, isn’t the fee. In fact, its biggest impact is indirect.

First, a late payment could make you lose your promotional benefits.

This is most important for a credit card. For example, if you took out a balance transfer credit card with a one year 0% interest period, a late payment can mean that you’ll now have to pay the usual APR. Most balance transfer credit cards have an APR of 20% to 35%.

For a credit card balance of £2,000, this can add close to another £200 to £350 in interest charges that you now have to pay.

Second, a late payment can also lower your credit score.

According to research by MoneyComms for TotallyMoney, a person with a good credit score could pay £1,396 less in interest each year compared to someone with a poor credit score, on a £5,000 personal loan.

As you can see, a late payment can hurt your wallet quite a bit, but not necessarily through the late payment fee itself.

How long before a late payment appears on my credit report?

In the UK, a payment is typically considered late if made after 5 PM on the due date in the time zone listed on the billing statement. If the due date falls on a Sunday or bank holiday, the payment is due on the next business day.

A payment must usually be at least 30 days past due before it is reported to the credit reference and appears on your credit report.

It may not be reported if you pay the overdue amount before the 30-day mark, although the lender may still charge you a late fee.

However, you might want to remember that even if a late payment is not reported to the credit reference agencies, it can still impact the relationship with your lender.

For example, your credit card provider might not want to increase your credit limit in the near future if you have a late payment. You might also lose some of the rewards you have on your card.

How long do late payments stay on my credit report?

In the UK, late payments stay on your credit report for six years from the date they were recorded.

However, the impact of a late payment on your credit score will diminish over time as you continue to make on-time payments and demonstrate responsible credit behaviour.

How much can a late payment affect my credit score?

The impact of a late payment depends on many factors. However, according to Experian, one late payment can cost you as much as 80 to 100 points. This is out of a total of 999 points, so quite a bit.

Also, keep in mind that how long a payment is late also matters. A payment that is 30 days late will have a smaller impact than a payment that is 60 or 90 days late. The longer the payment is overdue, the worse it can affect your score.

How can I avoid late payments?

To avoid late payments and their negative impact on your credit score, here are some tips:

  • Set up payment due date reminders on your phone or calendar. Some apps also have a feature to remind you of upcoming payments (Revolut, for example).
  • Use Direct Debit wherever possible.
  • Arrange an overdraft facility with your bank so you can cover a bill payment even if your current account balance is zero.
  • If you think you might be late with a payment, talk to your lender as soon as possible to see if they can work with you on a payment plan or offer a grace period.
  • Try to have your bill payment date moved closer to your payday.

What should I do if I already have a late payment?

If you've already made a payment later than you should have, there are a few steps you can take to reduce the damage to your credit history.

First, pay the bill as soon as possible so no further damage is made.

Next, contact the credit reference agencies and add the 200-word Notice of Correction to your credit report, in which you can explain why the payment was late. While this doesn't help your credit score, lenders will see it. They might understand if they know, for example, that you were late paying a bill because you were sick or lost your job.

Finally, work on improving your credit history.

The good news is that now there are many apps that can help you build and improve credit. One such app is Wollit.

Wollit works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor that matters for your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders you pay your bills on time, helping you reduce the impact of a single late payment in your overall credit file.

Wollit, no stress, no hassle - just a clear path to better credit

Terms apply. Results may vary. Improvements to your credit score are not guaranteed. Wollit Credit Builder plans are unregulated.

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Terms apply. Results may vary. Improvements to your credit score are not guaranteed. Wollit Credit Builder plans are unregulated.