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Monday, March 24, 2014

Late payments and how they affect your credit

This article is part of series of articles in honor of National Credit Awareness Month.

You may think that late payments aren't a huge deal until you start getting collection notices, however, a history of late payments can be much more detrimental to your credit score than you think.  Whether you have a bill that's 30 days late or 24 months late, it can cause a lot of negative factors on not only your credit score but your report too.  When it comes to late payments and your credit, there are a few things that consumers should be aware of: 

Late Payments are Factored Into Your Credit Score

As I'm sure you've probably heard, your credit score isn't just a random number.  It's calculated between various key factors on your credit report, late payments being one of them.  According to Statistic Brain, your payment history carries 35% of the weight of your credit score.  Therefore, a positive payment history will help boost your score and the longer you maintain a good record, the better your score will be.  

Quick Damage Isn't a Quick Fix

It only takes one missed payment to hurt your credit score, but it will take a lot more than one on time payment to repair it.  Since there are no overnight fixes for late payments, you should be more conscious about making them on time.  Quite a few credit repair companies out there might offer to fix it for you in a short amount of time with a fee, however most of these claims are a waste of your money and time.  The best thing that you can do on your own is to continue to make all future payments on time.  After two years, late payments hardly have an affect on your credit score.  

Don't Play the Blame Game, Take Charge

If you've recently had a late payment, be proactive about getting it taken care of.  A lot of the times, if you've had good payment history and only have missed one payment either the company or creditor will sympathize to that and remove the one late payment on your report.  Especially let them know about any extenuating circumstances that may have contributed to you missing a payment such as being laid off, illness, etc.  It's worth a shot to be proactive and negotiate with the creditor.  

Create a Plan to Stay on Track
From here on out, the best thing you can do is to keep your payment history in the positive.  Keep in mind that late payments only report after 30 days of a missed payment so even if you are a day late or 15 days late, pay the bill as soon as possible to avoid it reporting on your credit again.  You can obtain a free yearly credit report at www.annualcreditreport.com.  We recommend checking your report once year to make sure you know your score, you know what's reporting on your credit, and to ensure that everything is correct and satisfactory to you.  

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