Financially Tough » Late Payments

Credit Score Do’s and Dont’s

Thu, 27 Aug 2009 05:19:59 +0000

There are so much advice out these about how to improve your credit score and what you should do to maintain it. Here is a quick list to help you know what is best for your credit score.

Do: Pay your Creditors on Time

This seems obvious but is a struggle for many individuals. This is actually the single worse thing you can do to your credit score becuase your payment history carries such a large weight.

Don’t: Close Old Accounts You Don’t Use

First, closing old accounts could hurt your credit history. More specifically the average of all your accounts. This is a another major factor in your credit score and closing old account will skew the average. Also, you will lower the total available credit you have and thus raise your debt to credit ratio. Another factor that will weight against you in the credit score formula.

Do: Use a Budget Each Month

You need to know where your money is going at all times. A budget is essential to ensure you pay everything on time and pay down any debt you have. This will prevent you from saying at the end of the month where did my money go?

Do: Check Your Credit

You are allowed access to your credit reports free one time a year so take advantage of it. Creditors sometimes make mistakes and you need to check to see if your report is accurage. Cleaning your report of potential errors is a great way to get an instant boost to your credit score.

Don’t: Think You Can Close An Account To Make It Go Away

Many times individual will have an account that has many delinquencies and other issues, but thinking if you close it to make not appear on your credit report is wrong. It will stay on your credit report so there are many times no reason to close it and again you might be hurting your debt to credit ratio.

Do: Shop for Auto Loans and Mortgages

Sometimes you might hear the credit myth that shopping for credit will kill your score because of the credit inquires. Well, this isn’t exactly true. Consumers are allowed to shop for loans that represent a large purchase such as a mortgage or auto loan. They are not suppose to shop for unsecured loans like credit cards. These you know the terms up front and there is no need to shop.

Well, again these are just a few and there are many more, but hopefully there will be more of these down the road for me to write about.

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30 Day Late Payments

Sat, 06 Jun 2009 05:32:42 +0000

Consider a less severe form of delinquency 30 day late payments can have a varied effect on your credit score. Its effects are related to how often this happens. If you are person who frequently pays your accounts on time then one late payment can have a larger effect than a person who always pays late. Seems a bit counter intuitive but needs a explanation.

If you are person who pays your bill on time every month, you should have a better credit score than a person who makes frequent 30 day late payments. In turn, you are reward by the FICO score caluclation in the form of a higher credit score. Since you have a higher credit score with no late payments a single 30 day late payment raises a red flag. And the effect on your credit score will reflect this alert.

On the other side, the person with several 30 day late payments already has their score adjusted all their late payments. So another late payment is no surprise. This makes a 30 day late have less of an effect.

Overall you should never pay late. If you have many already in your account history you need to develop a plan to ensure it doesn’t happen again. If you already have a good credit score you need to protect it by never paying late.

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Late Payment Effects on Your Credit Score

Fri, 08 May 2009 02:55:04 +0000

The fact is there is nothing you could do to hurt your credit score more than pay your accounts late. The largest part of your credit score is your payment history to your accounts and the negative entries in this section carries the largest weight. Also, late payments effects on your credit score are lasting. Since your payment history on your credit report is seven years long, one late payment today will be with you for a long time.

The Three Ways Late Payments are Judged.

As said above eaqch late payment is looked at for three different criteria:

Severity – This looks at how long did it take you to get current? Was it 30, 60, 90, or 120 days till you paid your over due bill? The longer it took the larger the negative effect.
How Recent – Basically how recent was your last late payment? The longer it has been the better because your credit score puts a larger weight on anything more recent?
Frequency – How many times are you paying late? The more it happens the more it is going to lower your score.

Is One Late Payment Going to Kill My Credit score

This answer might surprise some people, but if you have never paid late it is going to hurt more than if you always pay late. The math behind your credit score or the FICO score calculation looks for any sign of default. If you never pay late this is a red flag and can drag down your score more than if you always pay on time.

The Best Way To Late Payment Effects on Your Credit Score

It is simple: PAY ON TIME. There is no better way and your credit score will thank you for it. Also, if you are trying to rebuild your credit, dispute any late payments on your credit report older than seven years. These can be removed.

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