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Advice

Having a higher credit score can ding you more points if you miss a credit card payment—here's how

Even if you have a perfect FICO score, excellent credit isn't always a good thing. CNBC Select digs into how missing or delaying a credit card payment could hurt more with a high score, plus how to maintain your excellent credit.

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Having a high credit score can reward you in many ways.

With good or excellent credit, you can receive lower interest rates and qualify for the best rewards credit cards.

But if you think your good credit behavior gives you more leeway when it comes to paying your credit card bills on time, think again.

"As the saying goes, the bigger you are the harder you fall," Bruce McClary, a spokesman for the National Foundation for Credit Counseling (NFCC), tells CNBC Select. "Those with top credit scores can suffer major setbacks when missed payments are reported."

Below, we dive into high credit scores and how to keep yours from setting you back.

What is considered a high credit score?

Credit score ranges vary based on the model used (FICO versus VantageScore) and the credit bureau that pulls the score (Experian, Equifax and TransUnion).

FICO scores are used in 90% of lending decisions, and these ranges are listed below, using estimates from Experian:

  • Very poor: 300 to 579
  • Fair: 580 to 669
  • Good: 670 to 739
  • Very good: 740 to 799
  • Excellent: 800 to 850

How would a late payment affect an already high credit score?

If you already have a high credit score, a late payment is going to have more of a dramatic effect on your credit score than if your credit score was previously lower. 

"Imagine a brand new car in pristine condition," Wilson Muscadin, financial coach and founder at The Money Speakeasy, tells CNBC Select. "A visible scratch on the hood of that car is going to have a more dramatic effect on the value of that car than a scratch on a 3-year old used vehicle. That credit score impact could be as much as 100 points."

Let's take a look at an example of just how much a missed or late credit card payment could affect your credit score. Below is an example of the effect that a 30- and 90-day missed credit card payment has on two consumers, according to FICO data.

Sophia Maria
Current FICO® Score 9607793
Result of a 30-day missed payment570-590710-730
Total credit score drop for a 30-day missed payment17-37 points63-83 points
Result of a 90-day missed payment560-580660-680
Total credit score drop for a 90-day missed payment27-47 points113-133 points

As you can see in the above, the higher Maria's credit score, the greater negative effect a 30- or 90-day missed credit card payment has on her account. Sophia already has her past behavior reflected in her lower credit score, but for Maria, the addition of one more indicator of risk (a missed payment) is more significant because of her clean credit history.

When is a payment considered 'late'?

The longer your payment is past due, the more your credit score will drop — so it's important to know when you've gone past your deadline.

From the perspective of your credit, a late payment is not considered missed or late until it is at least 30 days past the due date. Say you simply forgot to pay your bill on the due date, but you make the payment in full a few days later (remember that partial payments do not count). You may be subject to a late payment fee (often up to $40), but it will not be reported as late to the credit bureaus. 

The impact to your credit score depends on how late that payment is and the terms of your credit card. You'll likely get hit with a penalty APR, and the impact on your score could be "even more dramatic once you get 60 and 90 days past the due date," Muscadin says.

How can I maintain my high credit score?

Paying your bills on time is one of the most important steps in achieving — and keeping — a high credit score. If you don't make on-time payments, you may incur a late payment fee, a penalty interest rate and ultimately risk damage to your credit score.

"The same is true for overutilization of available credit, even at times when payments are being made as agreed," McClary says. "The best way to preserve a top credit rating is to be aware of the practices that could cause a score to drop and be especially careful to avoid them." 

Some steps you can take to prevent late payments include automating them, setting reminders or changing to a due date that works best for you. 

And when it comes to just keeping your overall credit score healthy and you happy, McClary recommends maintaining balances below 30% of the assigned credit limit and avoiding the urge to apply for too much credit all at once.

Once you learn how to maintain an excellent credit score, you can enjoy qualifying for the best reward cards, like the Blue Cash Preferred® Card from American Express, which earns cardmembers 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% on select U.S. streaming services, 3% cash back at U.S. gas stations and on transit and 1% cash back on all other purchases. That's a lot of money back in your wallet just for having a healthy credit.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.