Guides · 3 min read

Rebuilding credit after a setback: late payments, collections and what to do now

You can rebuild credit after late payments or collections, and the place to start is stopping any new damage. Negative items lose weight over time as newer, positive history builds up, so what you do from this month on is the part you control.

Start with what's actually on your reports

Before you plan anything, get your reports from Equifax, Experian and TransUnion. They're free every week at AnnualCreditReport.com, so you don't have to guess or pay anyone to look.

Write down every negative item you find: what it is, who reported it, the date and the amount. Your reports may not match each other, because lenders don't always report to all three bureaus.

If something isn't yours, or the dates or amounts are wrong, dispute it with the bureau that shows it. An error on one bureau's report needs a dispute with that bureau.

Know how long late payments last

Late payments can stay on your credit reports for up to seven years. That sounds like a long time, but their weight fades as they age and newer, on-time history builds up next to them.

A payment generally isn't reported late to the bureaus until it's 30 or more days past due. If you're behind right now and haven't reached that mark, paying before then generally keeps it from being reported as late. The lender may still charge a late fee.

Stop the next late payment first

Payment history is about 35% of a FICO Score, according to FICO. Every on-time payment from here adds to that history.

If an account is past due, getting it current stops it from being reported further behind each month. Then set up autopay for at least the minimum on every account that allows it, so a busy week is less likely to turn into a missed payment.

If you can see a payment coming that you can't make, call the lender before the due date and ask what options they have.

Handle collections carefully

A collection usually means the original lender passed an unpaid debt to a collector or sold it. These accounts can be confusing, with company names and amounts that don't match what you remember.

Before you pay a collector, ask for the details of the debt in writing so you can check that it's yours and the amount is right. If you agree to a payment plan or settlement, get the terms in writing too.

If a collection on your report isn't yours, or the details are wrong, dispute it with the bureau that shows it. Like late payments, collections count for less as they get older.

Add new, positive history at a steady pace

Old marks matter less when there's newer, on-time history next to them. If you have accounts in good standing, each on-time month adds to that history.

If you don't have an open card, a card made for people rebuilding credit is one way to add new history, as long as you can pay it on time every month.

Keep balances small compared with your limits. FICO says amounts owed are about 30% of a FICO Score. And space out new applications, since each one can add a hard inquiry.

The CFPB has free consumer guides on credit reports and scores if you want to read more about how reporting and disputes work.

What to do next

1. Pull your free reports from all three bureaus at AnnualCreditReport.com.
2. List every late payment and collection with the date and who reported it.
3. Dispute anything that's wrong with the bureau that shows it.
4. Bring past-due accounts current if you can, and turn on autopay for at least the minimum.
5. Check your reports again in a few months to see that disputes were handled and new payments show as on time.

This guide is general education, not financial advice. Card rates, fees and approval are set by each issuer, so check the issuer's own terms before you apply.

Cards for rebuilding your credit