Late Payments: The Credit Destroyer

It’s understandable that not everyone can make their payments on time. With the recent chaos swirling around the world, life is throwing out a lot of problems for people to handle, which includes finances. Sometimes things just slip our minds; after all, everyone makes mistakes in their lives. But those mistakes should not be a permanent scar upon your credit score.

Credit card companies take late and missed payments very seriously. That attitude causes a lot of stress for honest, good people who may have forgotten a single payment, which can cause a credit score to drop between 40 to 80 points! Not only that, the higher your credit score is, the more negatively it could be affected by a single late payment.

For example, those with good credit scores in the 700+ range can expect an 80 point decrease after a single late payment. Those with lower scores on their credit reports, such as in the 500-600 range, can expect a 30-50 point drop after a single late payment.

So paying on time can mean a big difference between a great score and an okay score.

Buy Why?

A credit score is the accumulation of all of your credit history put together by proprietary algorithms. No one really knows the formulation of these credit scores, but from what we can observe, late payments have a major impact on someone’s credit score and may make it harder to get a future car loan, mortgage, or personal installment loan.

Creditors, lenders, and furnishers want to know that the person they are lending money to is responsible enough to pay them back. Late payments make these companies nervous as they might worry if their lendees are even able to pay the money back. No one likes when someone is late to something, whether it’s arriving late to a meeting or paying late. How would you feel if your job was late with your paycheck?

What Can You Do?

There are multiple ways for people to be responsible and pay off credit card debt on time. The simplest way is to set up an automatic payment option through their creditor or through their credit card account. Every credit company and bank out there will have an option to allow their customers to make auto-pay an option for them. By having auto-pay on, the likelihood of having a late payment will dramatically decrease.

Nonetheless, not everyone is fond of the idea of setting up an automatic payment option with their creditors. Not everyone lives the same way, and thus, people may have a variable income every month due to independent or freelance work. A simple way to avoid paying more than you are able is not to have auto-pay turned on for their credit card, but to have an automatic reminder that’s been set every month or few weeks to pay as well.

Missing a payment can be incredibly detrimental to the future of someone’s credit, so it’s a good idea to set up a reminder or auto-pay option to avoid any sort of hardship later.

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