Twenty-Somethings' Questions about Credit Cards (Part 3)

/ BY / Credit 101

Here's the last installment of questions from young people new to credit.

What penalties will I have to pay if I'm late with a credit card payment?

Being late with a payment, even just a day late, will cost you—but less than it did previously.

Because of the 2010 Credit Card Accountability, Responsibility and Disclosure (CARD) Act, your bank can't charge you more than $25 in late fees the first time you're behind with a payment. If you miss the deadline for another payment within six months, however, that late fee can go up to $35.

One good thing—the late payment can't be more than the amount you owe. If you owe just $15, that's the highest late fee you'll have to pay.

But late payments hurt you in other ways. For one thing, the credit card issuer is likely to raise the interest rate on any new charges you make after a single missed payment. So if you don’t pay off your account each month, you’ll be shelling out more in interest.

One last caution about late payments: if you’re mailing in your payment, the date on the envelope doesn’t matter; the bank goes by the date it actually receives the payment. Make sure you allow plenty of time for a payment to reach your credit card company.

How does a late payment affect my overall credit?

That depends in part on how late your payment is. If you missed the deadline by less than 30 days, your credit card company probably won’t even send it to the credit reporting agency, so it won’t appear on your credit report. (But the credit card company will probably raise the interest rate on your account.)

If your payment is more than 30 days late, it will show up on your credit history and could affect the interest rate that you’ll be charged when you borrow money in the future.

Go past 60 or 120 days, and your account may be referred to collections. That’s one thing you definitely do not want appearing on your credit report.

Credit report and credit score--what’s the difference?

Here’s the definition of a credit report from the U.S. government’s Consumer Financial Protection Bureau:

  • "A credit report contains information about your credit history and the status of your credit accounts. This information includes how often you make your payments on time, how much credit you have, how much credit you have available, how much credit you are using, and whether a debt collector is collecting on any debt you owe."
  • Credit reports also can contain public records such as liens, judgments, and bankruptcies that provide insight into your financial status and obligations."

The credit reporting agencies (also called credit bureaus) take this information and use it to calculate your credit score. There are several different credit scoring systems, but the one that most people know is FICO.

So how do they figure my credit score?

Every bureau has its own formula, but FICO calculates credit scores this way:

  • 35% payment history
  • 30% how much you owe
  • 15% length of credit history
  • 10% new credit
  • 10% types of credit used

You can see that how important it is that you pay your credit card bills on time—that accounts for more than one-third of your credit score!

Can I see what my credit record looks like? Can I get my credit score?

The answer to both questions is yes—but getting a look at your credit score will cost you.

Under federal law, you’re entitled to one free copy of your credit report from each of the three major credit reporting agencies each year. (The credit reporting agencies are Experian, Equifax and TransUnion.) Learn how to get yours at

If you want to see your credit score, you’ll have to pay for the privilege. Although some sites (including the credit reporting bureaus) offer "free" credit scores, the deal actually involves you signing up for some kind of credit monitoring service that can cost $15 or more a month.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.