Angela K. Love
Personal + Business Finance Consultant

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Does Missing Debt Payments Improve Your Credit Score?

Mike Brown of LendEDU shared the results from the survey Millennials & Credit Cards Survey & Report conducted by the company.  500 millennials were asked various questions regarding credit cards.  The results were remarkable and support my ideology that financial education should start in elementary school and continue every year through kid’s senior year in high school.

The answers in the survey show the majority, 69%, of millennials use credit cards to build their credit history; however, six percent think their credit score will improve when missing a payment, and seventeen percent think nothing will happen to their credit score.  In short, millennials want to build their credit positively but they do not understand how to use credit cards properly to do so. 

In several of our podcasts and blog articles, we have shared how credit card debt affects a person’s credit and credit score.  We have discussed how FICO scores are calculated and how to use a credit card to build good credit and FICO score.  However, PAFS is a new company and small, and it’s difficult to know how to large voice in the millennial group or other generational groups. 

Missing payments negatively affect credit and credit scores…always!  Do not confuse missing payments with the Skip-a-Payment campaigns offered by financial institutions.  Skip-a-Payment programs are typically not used with credit cards but with installment loans such as an auto or personal loan.  When a person chooses to take part in a Skip-a-Payment program, their loan is extended by the number of months skipped.  Adding more months added to the loan means more interest.

Choosing to skip or miss a payment outside of approval as part of an offered program is considered defaulting on the loan.  The lending institution will report the missed payment, and the consider the account delinquent.  Also, when you missed a month, that month’s payment, along with any incurred interest and late fees, will be due with the next month’s payment.  You may be thinking you had some extra money but the money due is still owed and interest, along with late fees, are added and due. 

Depending on the terms of the credit card agreement, missing a payment could mean the interest rate will increase along with the late fees and additional interested mentioned earlier.  For example, the interest rate for a credit card could be 10%, but upon the first missed payment, the interest rate could shoot up to 18%.  Do you know the terms of your credit card(s)?  If not, look at your credit card agreement.  If the agreement is difficult to understand, call the company and ask them to explain the terms.    

For those of you who understand the ins and outs of credit card use, please share your knowledge with those who don’t.  Talk to teens, college students, and others and guide them to resources to help them understand.  Seeing 69% of millennials in the survey wanting to build good credit leads me to believe they are trying to be responsible, but inaccurate information leads to good intentions ending in disaster.  As my husband frequently says, “Debt is like a table saw.  It can make beautiful things or cut your arm off.”  I want everyone to create beautiful things!