Missed payments will affect a credit rating for the next 7 years. It is 10 years in the case of chapter 7 bankruptcy. There are many occasions when it is no longer possible to keep up with debt repayments. It is widely recognised that defaulting on credit will, subject to the severity of the transgression, change credit scores for the worse. Whilst it's not possible to determine the exact effect as the formula remains a secret, the objective of this article is to provide an indication of how much lower credit score ratings will be following a default on credit for those with a score of 680.

30-Day Late Payment and Maxed-Out Credit Cards - 10 to 80 points

  • Whilst paying a few days late will normally just lead to a few extra charges, paying more than 30 days later will negatively change credit score rating by 60 to 80 points. Always settle debt within the grace period.
  • Maxing-out a charge card will typically lead to a fall of 10 to 30 points. It is advisable not to use more than 30% of the allocated credit limit on any card. It is better to spread any debt over several cards or pay some of it off in order to benefit from a higher rating.

Debt Settlement Involves Defaulting on Credit - 45 to 65 Points

The popularity of debt settlement programs as an alternative to bankruptcy has grown in recent years. It provides struggling debtors' with the chance to eliminate debt for as little as 50 cents on the dollar. Whilst this debt free plan has its benefits, it often leads to a poor credit score. It will typically cause a score to fall by 45 to 65 points. A lot depends upon whether that person has already defaulted on credit. Offering something to creditors each month, rather than leaving one or more accounts delinquent, could actually change credit scores for the better.