Are these Hindering Your Credit Score?

When you think of your credit score, it’s natural for your thoughts to jump immediately to loans. After all, it’s a credit score. It’s supposed to be all about what goes on when you borrow money. However, even so, there are times when your non-credit actions can lead to problems with your credit score.

Increasingly, all of your financial decisions are connected. If you aren’t careful, some of your non-credit indiscretions could end up on your credit report — and drag down your score.
                                  

Unpaid Library Fines

You might not think it’s a big deal to avoid paying your library fines. It’s not a loan, and you probably will return the book…eventually. However, this might not always be the case. Increasingly, libraries are turning unpaid fines over to collections agencies. Looking for sources of revenue, these libraries are looking to collect on outstanding accounts.

So, not only will you be unable to check out a book next time you go to the library, but you might also end up with your account in collections, which makes it visible on your credit report.

Improperly Cancelled Gym Membership

Read the fine print when you sign a gym contract. Chances are that you are required to physically come into the gym, and fill out paperwork, when you want to cancel. If you don’t cancel properly, the gym still has the right to keep asking for your money each month. Many consumers just stop paying their membership fees, or they direct automatic billing agreements to end. The problem is that the gym keeps charging and sees the non-payment as a problem. All of those non-payments are added up and then turned over to collections, and listed on your credit report.

Missed Utilities Payments

The non-credit service providers can turn your account over to collections. At that point, it becomes a problem that can impact your credit score. Want to find out where your credit score stands?
 Visit: www.cibilconsultants.com
Source: Secondary

Weird reasons: Credit score is low!

It can be frustrating to find yourself with a low credit score. If you’ve been using credit responsibly, it can be quite shocking to look at your score one day and see that it’s not as good as hoped.

This happened to my husband and me once. We were applying for our mortgage several years ago, and we were surprised when my husband’s score was about 20 points lower than expected. After going through a three-bureau report with the mortgage lender, we discovered that the culprit was the fact that he had several duplicate accounts reported on his reports, some of them with inaccurate balance information.

We were able to clean up my husband’s credit report, and he enjoyed a bump in his score. Not all issues are quite as straightforward, though. Here are some of the weird reasons that your credit score might be lower than you expected:

1. Your credit limit is missing a zero

At first glance everything seems fine. There might be no derogatory information reported, but the score is high.

For some reason, the credit utilization was high.

Small errors like that can make a big difference. Check your credit report for inaccuracies so you can catch them, and keep them from dragging your score lower. 

2. Frequent moves

Moving too frequently can have an impact on your credit score.

It’s not that moving itself is the problem, but rather the fact that it’s easier for things to fall through the cracks when you change location frequently. If you move, and forget to change your address, or let your creditors go, you might miss a bill or two, and that can lower your credit score.

Another difficult situation is if you regularly break your lease when you move. If you don’t pay what you agreed to, the landlord might decide to turn your account over to collections, resulting in a negative mark on your credit report. 

Also, realize that moving internationally can also take its toll. Your credit report doesn’t always follow you around. Different countries have their own reporting agencies, and you may have to start fresh.

3. Duplicate names

If you have the same name as your dad, that could result in credit score issues. It’s possible that some of your dad’s bad habits are attributed to you. There are numerous instances in which the credit sins of a parent are visited on a child due to confusion over names in a credit report.

This is also a possibility when it comes to other duplicate names. Someone with a common name, might have a number of random bad credit items attributed through confusion. In these cases, you usually have to show documentation, and the credit reporting agency has to verify your identity with the help of your Social Security number.

4. Marriage

In general, getting married shouldn’t impact your credit score. However, you have to make sure you follow the right procedures to ensure that your name change is recorded, and associated with your existing credit report. If you aren’t careful with the change, Haney says that marrying the person of your dreams can bring down your score.

However, you still need to be on top of the situation, and check for inaccuracies, since this transition can lead to misreported items.

The good news is that your new spouse’s credit problems shouldn’t affect your credit score. However, if you get a joint loan together, a low score for your spouse could mean that you end up paying a higher interest rate. 

Bottom line

You might think that you have a good credit score because you pay your bills on time and keep your debt levels low. However, there are some small quirks that can impact your credit unexpectedly, usually through some inaccuracy on your credit report.

If you want to avoid surprises down the road, it makes sense to check your credit when you can. 
Source: Secondary

What After Credit Score?

Many consumers look at their credit scores and are at a loss for what to do next. Since a credit score is the reduction of your entire credit history to three digits, it’s hard to really see what is happening to get your score to this point. You might see that you have a low score or a high score, but what does that mean for you and your finances? How can you go behind the credit score to get a better idea of what you can do to improve the situation?

The first thing beyond the credit score is a person’s credit report.

Your credit report and clues about your credit score.

It’s the information in your credit report that is used to determine your credit score. Credit scoring models assign numeric values to the information in your credit report and use an algorithm to figure out what your three-digit score will be. But the process isn’t even that straightforward. 

 Each of the credit reports from the different credit reporting agencies is used in the creation of credit scores, and that means that differing information between credit reports can result in different scores. Plus, individual lenders might use their own modifications of scoring models, emphasizing different aspects of your situation, depending on the loan you are getting.

As a result, your first step is to dig into your credit report to make sure the information listed is correct.  If there are any errors, you should dispute them. “potentially material” error about information often used to generate credit scores. 

Once you have your credit report, you can begin looking at information to help you see where you might be weak. Fix errors on your report, identify problem areas, and begin to move forward.

Consumer credit sites and in-depth help with your credit score.

Sometimes, even after you get a copy of your credit report, it’s hard to identify what items are causing you problems, and how each part of your report impacts your credit score. Getting beyond your credit score to see what actions you can take to improve your situation sometimes requires guidance. 

Consumer credit sites make it a point to analyze your score, breaking it down in plain terms for you. If you have a low score, a consumer credit site can tell you exactly why. The explanations of these reason codes can provide you with greater insight into how your score is figured, and help you see exactly which of your behaviors are contributing to a score that might not be quite as high as you would like.

Not only do many consumer credit sites offer you information about the “why” behind your credit score, but many also provide you with concrete steps you can take to improve your credit situation. You can receive helpful strategies for improving your credit score specifically, and improving your finances overall. With helpful insight and guidance in creating an action plan, your credit score becomes more than just a number; it becomes a way for you to confront the realities of your situation and make lasting changes to the way you manage money. This can save you money on all sorts of financial services, from loans to insurance.
                                 

Your credit score gives lenders and others in the financial services industry a way to make snap judgments about you, and the way you are likely to handle credit (and, by extension, your finances). However, this doesn’t mean that you can’t dig into your score and figure out how to improve it so that you put your best foot forward.

Remember that a credit score is dynamic. A bad one can be improved in a short amount of time. A good can be lowered in the same short amount of time.

The right resources, and an understanding of what goes on behind the scenes of your credit score, can help you stay on top of the situation and build a credit reputation that ensures you the best loan rates and other good financial deals.

Source: Secondary

Foreclosure can impact your credit!

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating?

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.

The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. Additionally, reports that your credit can be impacted even more if your credit score is excellent. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.

Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                 

Improving your credit after a foreclosure

It can take several years to improve your credit after a foreclosure. You might not even be eligible to buy a home for two or three years after the foreclosure is complete. However, you can start working to improve your score.

One of the ways to get started is to have someone with better credit add you as an authorized user to a credit card account. However, for this strategy to be effective, you need to have a close relationship to the other consumer, as a spouse or a child.

You can also start improving your score by getting a secured credit card. You might not be able to qualify for a “regular” credit card right after a foreclosure, so a secured card can help you begin re-establishing your credit. As you make on-time payments, and they are reported to the credit bureaus, you can begin to see improvement. After nine months to a year, you should be able to “upgrade” to an unsecured card that will further help your score.

Other types of small loans, such as a personal loan from your bank or an auto loan, can also help you improve your credit. You need to be prepared to pay higher interest rates, though. As long as your credit is poor, you won’t qualify for the lowest rates. When your score starts to improve, you can take advantage of better offers and lower your interest rates.

Source: Secondary

Excellent Credit Means?

One of the realities of finances is that many lenders and other financial product and service providers want to know your credit score. Your credit score is essentially a summary of how you handle your money. The higher the score, the better deal you will receive, whether it’s a lower interest rate on a loan or a better quote on your car insurance.

Excellent credit can mean saving tens of lakhs of rupees over your lifetime. In some cases, especially with mortgages, you could potentially save more over the course of 30 years.

What Results in an Excellent Credit Score?

                          

Many consumers don’t think it’s fair that the credit score has become a stand-in for financial responsibility. The argument is that truly good financial habits don’t require you to borrow. For the most part, a credit score only measures how well you have handled your loan obligations. If you don’t borrow, you don’t end up with a credit score. So, unfortunately for some, the first step to building an excellent credit score is to apply for — and obtain — credit, usually in the form of loans.

Once you have loans, your next step is to make all of your payments on time and in full. You don’t need a ton of loans to build up to excellent credit, though. Usually, it’s sufficient to get an installment loan (make the same payment each month to pay off the loan within a set period of time) and a revolving loan (like a credit card). If you are careful to borrow a small amount and make regular payments, you will start building your credit history. It’s important to be careful to incorporate any credit spending into your regular financial plan so that you don’t get in over your head with debt.

There are different credit scoring models, but most have ranges between 350 and 850, or something similar. In many credit scoring models, you need a score of at least 720 to 740 to be thought to have excellent credit. When you have excellent credit, you usually qualify for all the best rates. And, as long as you have enough income to afford your payments, you shouldn’t have trouble qualifying for just about any loan.

If you want to get good deals, from qualifying for a good apartment without paying a large security deposit, to getting the lowest mortgage rate, cultivating excellent credit is a necessity. 
Visit: www.cibilconsultants.com
Source: Secondary

Look for these on your credit report!

You probably already know that you should check your credit report at least once a year. But just why should you care about your credit report in the first place? Well, your credit report is the “snapshot” of your financial health that’s used by lenders, landlords, credit card companies, insurance agencies, cell phone companies and even future employers to judge your creditworthiness. 
Your credit report and your credit score is based on your credit history, and lenders use that to decide your ability to pay your bills or repay your debt.

So your credit history impacts a lot, which is why checking your credit report and making sure it’s accurate is so important. Understanding your credit report – what you owe and to whom – and making sure your report doesn’t have any errors will make sure that you’re as financially healthy as possible.
                     

When you do get your credit report, you’ll want to look through it to make sure that everything is accurate and there is no suspicious activity or accounts you don’t recognize. Here’s what to look for when you look through your credit report:

Information that’s not yours: If you have a common name, your credit history might have some information from someone else’s history. Make sure your name and address are accurate on your report.

Information from an ex-spouse: If you are divorced, your ex’s information may be mixed up with yours.

Accounts you don’t recognize: If there is an account on your credit report that you don’t recognize, it could mean that someone has used your personal identity to open up financial accounts in your name. This is also known as identity theft. Identity theft happens when someone steals your personal information and uses it for financial gain. A person might open a new credit card account or open a new bank account in your name if they someone got access to your full name, birth date and Social Security number. If bad checks are written or bills are not paid from these accounts, it will show up on your credit report.

Out-of-date information: You may have negative marks that are listed after the legal deadline for removing them from your report. Most negative marks can stay on your account for up to 7 years.

Wrong notes for closed accounts: An account that you closed yourself may look like a creditor closed the account. An account closed by a creditor can actually hurt your credit history, so make sure it’s reported correctly.

Non-delinquent accounts still appear as delinquent or more than one delinquent date is listed on your account: Credit reporting agencies may not have noted which delinquencies have been fixed. Similarly, it you have an account that’s in collections, your report might accidentally have more than one date for when your account became delinquent. Make sure there’s only one date listed.

If you do spot an error on your credit report, you have the right to dispute any inaccurate or incomplete information. You’ll need to contact both the credit bureau and the organization or company that provided that information. Both are responsible for correcting inaccurate or incomplete information in your report.

Learn more about identity theft, visit: www.cibilconsultants.com

Source: Secondary

They affect your credit score most.

You probably already know about the connection between your credit history and your credit report and how both impact your credit score. Remember that your credit score is like the grade on your credit report: companies use this number to rate your likelihood that you’ll repay your debts and pay your bills.

But just what are the factors that go into calculating your credit score? And which ones impact your score the most?

Here’s the breakdown of what affects your credit score, from the highest impact to the least:

Your payment history : Whether you pay your bills on time and if you always pay at least the minimum amount. Even one late payment can impact your credit history.

                      

The amounts you owe : Some percent of your credit score is determined by the amounts you owe, which is made up of two parts: the total amount of money you owe all your lenders and the percentage of available credit that you’re using (like hitting the limit on your credit card). People who are using less of their available credit are considered lower risk than people who are using a lot.

The length of your credit history : The amount of time you’ve been using credit makes up fifteen percent of your credit score. Someone who has been using credit for a long time is considered less of a risk.

New credit you open or try to open : Some percent of your credit score is also based on the amount of new credit you’ve applied for recently. Every time you apply for a loan, credit cards, store cards and even a cell phone, someone will run your credit. Someone who applies for a lot of credit in a short amount of time is seen as a credit risk.

Types of credit : The types of credit you have impact about ten percent of your credit score. People with a mix of credit types, like credit cards, an auto loan, and a mortgage may have a slightly higher score than those with only one type.

So, now you know what makes up your credit score, which is your overall “credit grade.” Your credit report, on the other hand, gives you all the details about each account and shows you everything from how much money you owe, how many accounts you have, how many accounts are in good or bad standing, and how many times a lender or another company has checked on your credit history. Since, your payment history make up 35 percent of your credit score, you’ll want to pay attention to two places on your credit report: potentially negative items (accounts unpaid or past due) and your status and payment history.

Even if you do have a few negative marks on your credit report, the good news is that on-time and regular payments can help boost your credit score. It may take a little time and patience, but paying your bills consistently can help boost your credit.

Source: Secondary

Divorce can affect your credit score!

In many marriages, one spouse pays little to no attention to the household finances. But if the marriage is coming to an end, both spouses need to be concerned because divorce can have a substantial impact on both of their credit ratings.

The act of divorce itself doesn’t impact your credit. But divorce is rife with financial issues, and the division of assets and debts can have a huge impact on the credit history of both you and your spouse.

Perhaps the main impact of divorce on credit involves joint accounts. A divorce decree will spell out who is responsible for which accounts, but it will not actually remove one spouse or the other as an account holder. Thus, it is still up to you or your former spouse to remove the name of the person who is no longer responsible. The person who is no longer responsible for the account should ensure that his or her name is removed, particularly from any jointly held debts, so that he or she will not be liable in the event the other spouse fails to make the required payments. Failure to ensure the removal of your name from such accounts can negatively impact your credit for a long time, even if your spouse’s actions occur years after the divorce is settled.
                               

Your liability for debts incurred during your marriage may depend on the law in the state where you reside. In community property states, such as California, the law presumes that you and your spouse are entitled to half of what the other earned during the marriage, and are responsible for half of the debts incurred. However, in equitable distribution states, the law requires that assets and liabilities be distributed equitably and fairly between both spouses.

During divorce proceedings, while your name is still attached to jointly held debts, you should ensure that timely minimum payments are made toward each debt, in order to protect your credit history. Even if your spouse has historically made those payments during your marriage, he or she may not continue to do so during the divorce. If the divorce decree provides that your former spouse is required to make payments on accounts held in your name, you should monitor the activity on the account closely to ensure that the payments are made, since the lender will still hold you responsible and it will be your credit that is impacted by any failure to make timely payments.

Another area that is significantly impacted by divorce is each spouse’s income. What is affordable when two spouses’ incomes are pooled is often not affordable when the same amount of income must support two separate households. This may be particularly true when children are involved and one spouse keeps the family residence, with the same mortgage amount and living expenses, while the other spouse must acquire and maintain a new, separate residence. You will need to ensure that you can manage to pay all necessary expenses subsequent to the divorce, or you may find yourself falling behind on payments and that will negatively affect your credit.

Your good credit may be extra important in the event of a divorce, since it will be the sole basis on which lenders will decide whether to grant you a car loan or mortgage. Prospective landlords may consider your credit history in determining whether to lease you a new home. Therefore, it is extremely important that you do what you can to protect your credit during your divorce.

Source: Secondary

No Problem, if you have no credit score!

Seems like you need credit for everything: buying a house, getting a loan, and even renting an apartment. Your credit score is your magic number to unlocking a lot in your financial life. But if you’ve never had a line of credit to your name or you barely have any credit history, you may be struggling to think of where you fit into the credit history equation.

If you don’t have any credit history, you have two options: start building credit history or go off the grid and try to avoid needing credit in the first place. We’ll cover how to accomplish the first point – which is arguably a lot easier than the second choice, though not impossible.

So, just how do you go about building your credit history? Here are a few simple steps to building solid credit:
                       

• Double check to make sure that you do or don’t have any credit history. You’d be surprised what may or may not be in your credit history, even if you don’t think you have any credit to your name or you’ve never checked your credit before. Before assuming that you’re starting with a blank slate, you’ll want to check your credit report. That will show you if you have any lines of credit that have been opened under your name. If there are any accounts you don’t recognize, your name might have been used to open up an account without your knowledge (or it could be that one account you opened years ago that you forgot about…).
• Ask your bank about a secured credit card. A secured credit card is an easy way to start building credit through your bank or credit union. They’re kind of like a mix between a debit card and a credit card, since you’ll need to make a security deposit first and then you’ll receive a credit limit that’s usually equal to the deposit you made. But unlike a debit card, activity on your secured credit card will be reported to the credit reporting bureaus, helping you build credit history.
• Once you have momentum, open a second line of credit. Once you’ve got some positive credit history with a secured credit card, you’ll want to open a different line of credit to help build your score and mix things up. Different types of credit besides just a card can help boost your credit score, so consider taking out a smaller loan or opening up another account.
• Use your credit responsibly. Once your start building credit, you’ll want to make sure that you use it responsibly. The worst thing you could do is damage your newly established credit history! Late payments, even on small things like your utility bills, can end screw up your credit history in the long run.

So that’s the basics of credit building. But if that’s not your style, you may choose,

Go off the grid. If you don’t want to play the credit score game, it can be really difficult but not impossible to live with a super low score or no credit score at all. Instead of using a credit card or taking out traditional loans, you’ll probably have to resort to using debit cards and borrowing from friends, family or other alternative lending sources.

Source: Secondary

When did you last check your credit report?

One of the most important aspects of your finances is your credit. Your credit score is an interpretation of the information in your credit report. Keeping on top of your credit report is vital if you want a good credit score.

With so much riding on your credit, it makes sense to check your credit report monthly so that you can keep tabs on your situation.

                                    

Are You an Identity Fraud Victim?

You probably understand the importance of checking your credit report to see where you stand before you apply for credit. After all, you don’t want an unpleasant surprise when you apply for a mortgage! However, even if you don’t plan to apply for a loan in the near future, it still makes sense to check your credit report.

By keeping tabs on your report, you can quickly identify cases of identity fraud. Your credit report can provide you with a big identity theft red flag: “Has a new creditor appeared on your report for an account you know you didn’t open?”

When you see a new loan, in your name, might be an indication that your identity has been stolen. With so much publicity surrounding data security breaches at major retailers , it’s especially important for you to check your credit report to see where you stand.

You can spread out your reports so that you get one from each bureau every four months. 

The faster you catch this identity fraud, the faster you can fix the problem and restore your good financial reputation.

What About Mistakes?

Sometimes, it’s not a matter of fraud when information is wrong on your report.Checking your credit report is important not just to identify possible identity theft, but also to make sure that the information in your credit report is accurate. Companies use your credit report to determine credit worthiness for a loan and whether you will be eligible for purchasing insurance in some states.

And that’s not all, some employers also review credit reports when making hiring decisions. Negative mistakes on your credit report can cause you to appear less responsible than you are, and could cost you the job.

So, credit report mistakes can result in higher interest rates on loans, and in higher insurance premiums, as well as affect your ability to get a better-paying job in some cases. Over a lifetime, mistakes on your credit report can cost you thousands of dollars — and they might even cost you a job.

Are You on the Hook for Someone Else’s Debt?

Another good reason to check your credit report regularly, is when you are on the hook for someone else’s debt. If you have joint or cosigned debts, you should check your report frequently.

Many married couples apply for debt jointly. This means that your credit accounts are in both your names. It’s important to check your credit report if your spouse is in charge of making payments, just to be sure that it’s actually happening, since your credit rating is impacted by the status of your joint your loan.

It becomes especially important to keep up with payment history if you are divorced. Your shared debts are usually divided. This means your ex might be in charge of making payments on your joint credit account. If he or she doesn’t meet the obligation, it reflects on you. Regardless of your divorce decree, you are on that bill.  Creditors don’t care about your divorce.

Whenever possible, try to get your name off the debt when the divorce goes through. If this isn’t an option, check your credit report regularly to keep tabs on the situation.

This is also a requirement if you have cosigned on someone else’s loan. When you cosign, you accept responsibility — even though the other person is making payments. Check your credit report to see whether or not that debt is being paid on time. If it’s not, you will need to take steps to prevent it from destroying your credit. This isn’t just about divorce. This applies to accounts with children, parents, friends, or anyone you’ve entered a loan with, or cosigned for.

Your credit report can provide you with advance warning that something isn’t right with your financial image. 
Check it regularly, fixing mistakes, identifying fraud, and intervening when it looks like your joint or cosigned debt isn’t being paid as agreed.

To learn more about identity theft, visit www.cibilconsultants.com
Source: Secondary

For Successful Financial Cleaning

There’s a good chance that momentum has dissipated for you. You’re not alone. According to a study done last year by the University of Scranton, only eight percent of people successfully complete their resolutions. With your finances though, it’s not too late to make positive changes and see the benefits quickly. As we move into spring and the days get longer and warmer, here are five tips to help inspire some financial spring-cleaning to get your finances in order.

Understand your situation

It may feel like having to face up to harsh reality, but any financial improvements you make are guesswork if you’re not working from a real picture. Checking your credit score and reports first is important, as it can direct you to the parts of your financial profile urgently in need of attention. A personal financial management tool that aggregates your spending can give you an itemized picture of just where your money is going. You’d be surprised at how much money you’re wasting in areas of your life you’re not paying attention to.
                             

Set a specific goal

It’s not enough to just want to “spend less” or “be better.” As well-intentioned as these sentiments are – and as strong as they may feel to you – they aren’t going to help. Set a specific goal to achieve within a defined timeframe. When you think about spending less, what comes to mind? Looking at your credit report, or a breakdown of your spending, where does it appear that you’re going wrong? Flesh out that desire for improvement, and turn it into a real task. Give yourself a deadline that you can look forward to.

Look for small changes with a big impact

Closely peruse your credit card bill. Think critically about what you pay for and what you actually use or need. Is that Time Magazine subscription leaving you with a pile of old magazines in the corner?  If you’re not using your gym membership, even the cheapest monthly commitment can represent hundreds of wasted bucks. Swap a deluxe cable package for a few well-placed streaming services, or cut streaming out altogether. Take a good look at your mobile bill. You might be paying for a big data plan alongside unlimited calls and texts just out of convenience, but not actually need it. Take a second look at the market to make sure you’re getting the best deal for insurance. 

Beyond this, simple lifestyle tweaks can have massive financial impact. If you buy lunch or eat dinner out most days, packing a lunch one extra day a week and making an effort to cook at home more often can save you hundreds of bucks. Rather than heading out to the movie theater, watch a movie at home. The sacrifices don’t have to be big, but the savings will be.

You can make it fun

Financial prudence doesn’t have to be a drag. Treat yourself when you achieve your goals. Give yourself something to look forward to. Celebrate, responsibly, when you get there. If you have a partner, share the success with them. More than anything, it’s something to feel good about.

Source: Secondary

How late payments affect your credit ?

We’re all guilty of forgetting to pay a bill on time, or stuck in a situation where the funds just aren’t available. What are the true effects of paying a bill late, and how does it really affect our credit history?

Whether you’re 1 day late or 30 days past due, having a late payment in your credit history will have a negative impact for years to come. Here’s what you need to know about making late payments and how to recover from it. 

                                

How does one late payment affect you?

There are five different factors that determine your entire credit score. Payment history is the single most important factor, making up 35% of the entire pie. So this is a vital part of building a good financial history that you want to make a priority.

Since paying your bills on time makes up the largest effect on your credit history, it gives evidence to the fact that you’re unreliable at repaying loans on time. This ups your risk factor to any bank or financial institution who’s considering offering you a loan.

A long history of timely payments shows that you’re a reliable borrower capable of repaying debts on time. But a poor history of timely payments suggests you’re a high-risk borrower.

This can affect your bottom line in several ways:

• Causes you to be denied for certain loans or consolidation methods
• Forces you to pay high interest rates and even higher fees
• May decrease your overall credit score

How long does it take to recover from a late payment?

So, what happens if you do have a late payment (or several) on your record? Well, the first step is to bring all your accounts up to paid status, so if you have any outstanding bills due pay them as quickly as possible. Showing a delinquent account on your credit report is much more costly than having a past due status.

Although the negative impact from making a late payment does decrease over time, it will remain on your credit report for seven years before dropping off. If you have more than one account where a late payment was posted, this will have an even greater affect on your credit than simply one past due account.

What can you do if your payment is late?

If you find yourself in this situation, don’t lose hope. There are still a few things you can do to turn this around for the better.

• Request the late fee be refunded. Leverage your loyal customer status and call the financial institution to request they refund the late fee you were charged. The will likely honor your inquiry and forgive the fee — especially if this is your first offense.
• Reset your interest rate. If your interest rate spiked due to the late payment, remind the company or card issuer that they are required to reset your interest rate as long as you make on-time payments over the next six months. If you hold up your end of the bargain, so will they.
• Make payments on time. Going forward do whatever you can to make all of your payments on time. This will help to slowly improve your credit history over time and establish you’re once again a trustworthy borrower again.

Having a late payment isn’t the end of the world, but it can negatively affect your credit score. Use these tips to get back on track and start building a solid financial history again.

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