Whether you start a monthly subscription or obtain a personal loan, when you sign the dotted line, you agree to make payments on time or face the repercussions that come with it. These consequences can range from canceling your service to using your assets for collateral. But what happens to your credit? Does a missed payment affect your credit score?
In this article, we will explain what happens to your credit score when you miss a payment and how you can avoid negatively affecting your credit history.
When Is a Payment Considered Late?
Creditors will wait 30 days before reporting to credit bureaus that you’re late on your payment. This means you may have time to pay your debt without a blemish. However, some creditors will charge a late fee on top of your set amount.
How Can Late Payments Affect Your Credit Score?
Does a late or missed payment affect your credit score? Your payment and credit history is a lens into your repayment habits, so paying your loans on time is critical. If you fall behind, it’s important to act quickly to prevent a decrease in your score.
The longer you wait to pay your loans, the more your credit will drop, and the fewer loan opportunities you will have in the future. This means obtaining an auto, house, or personal loan will be tougher. Leasing an apartment or getting another credit card will also be more difficult.
Ways To Avoid Late Payments
Set Up Due Date Alerts
One of the best ways to ensure you don’t miss a payment is by setting alerts on your phone when a due date is near. This way, you will have a reminder at the top of your screen, and it’s hard to miss. If possible, you can set up auto-pay for certain bills and payments. This way, you won’t have to worry about being late or missing a billing cycle.
Change Your Payment Date
When scheduling your payment dates, it’s best to set them all on the same day or when you receive your paycheck. This way, you can keep track of what’s coming from your account with no surprises. However, this works only if you have enough to cover all your payments. Evaluate your expenses and choose which days or weeks work best for you financially.
Consider Debt Consolidation
If you have multiple debts and struggle to keep up with your payments, you should consider consolidating them. Debt consolidation means minimizing your debt to one single loan. This will help you keep track of your accounts since it’s one monthly payment. However, you should only consider this option if you’ve tried alternative ways to minimize your payments.
At Superior Financial, we understand that everyone’s life journey is different, and we won’t punish you for having an unsatisfactory credit history. We make obtaining and applying for a personal loan easier and have been a trusted creditor for over 25 years. Contact us today for more information or questions regarding our services.