Failing to pay a monthly bill promptly can have major consequences.
Some companies will slap you with late fees, higher rates of interest, and other penalties when you miss a due date.
If you neglect a bill for too long, it could show up as a late payment on your credit report and hurt your credit score. And if you never pay, debt collectors or court judgments might be in your future.
Most of these scenarios can be avoided if you act quickly. Here’ s what you should do if you missed a monthly bill payment.
Pick Up the Phone
Whether it’ s a credit card, utility, or loan, the best way to deal with a missed payment is to call the company once you realize your error. The sooner you pick up the phone, the sooner you can make things right, and you may even be able to avoid penalties or damage to your credit score.
You should contact the company, just take responsibility for your mistake, and express your willingness to pay. From there, you can work out a solution.
Free Credit Consultation – Repairing Your Credit Can Help You Save Money
“ Missing a monthly payment is never a good idea because
it may reflect poorly on your credit report, decrease your credit score and even cost you money in penalties and fees. When you do miss a payment or know that you’ re likely to miss one, call your lender, ” said Natasha Rachel Smith, a personal finance expert at TopCashback. com.
Make the Payment …
If you have the money, you should pay your late bill immediately. Once they’ re 30 days late, missed payments can start affecting your credit. The damage to your credit further increases as a late payment his the 60-day and 90-day delinquent mark. At 120 days, they are often charged off or sold to a debt collector, which will decrease your credit scores even more.
In a nutshell, paying your bill now can eliminate or minimize further harm to your credit.
… Or Work Out an Alternative
If you can’ t afford the payment now, you may be in a position to negotiate an alternative solution like a payment plan or extension. Many lenders and service providers would rather negotiate a solution than walk away with nothing.
“ Often lenders are willing to negotiate with you if you’ re upfront about your financial situation, ” said Smith. “ Remember to evaluate your finances prior to calling so you can have a notable idea of when your finances will be to be able or when you’ ll manage to continue your monthly payments. ”
Ask for Waived Penalties
Some businesses impose late fees for missed payments, and certain credit card providers may raise your interest rates. Unpaid automotive loans could even result in your car getting repossessed. But if you call, explain your position, and offer to pay the bill, perhaps you are able to avoid certain penalties. If you’ re a longtime customer in good standing, you involve some leverage for negotiation.
“ Use your loyalty as leverage, ” said Lisa Rowan, writer and personal finance expert at The Penny Hoarder. “ They may be open [to] waiving your late fee or [accepting] a payment by phone. ”
Set Up Automatic Payments.
After a late payment scare, you should consider setting up automated payments that trigger from your bank account on payday. This will help you avoid missing future due dates.
“ The ultimate way to prevent missed payments is to automate your payments. Once you get your direct deposit, set it up so your credit card is paid on a certain day of the month followed by other utilities, rent, internet, and more, ” said Rowan.
Check always Your Credit Report
Even if you eventually paid your bill, a late payment over thirty days can land on your credit report and damage your credit score, so you should check your credit report to see if it’ s there. While there may not be much you can do about legitimate late payments, inaccurate negative information may be disputed and taken off your credit report.
You should check your credit report for free once a year at AnnualCreditReport. com . You can also track your credit more regularly. Credit. com’ s free Credit Report Card is an easy-to-understand break down of your credit report information that uses letter grades— plus you get two free credit scores updated each month.
Read more: blog.credit.com