The Effects Of A Late Credit Payment

September 15, 2020
FINAL DEMAND FOR PAYMENT LETTER

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In tough times, a missed credit payment can happen. A recent survey found that 32% of renters and homeowners entered August with unpaid housing bills from a prior month with over 20% owing more than $1,000. Unfortunately, a missed credit payment can drop your credit score by over 100 points as it is “a sign of risk” to a lender. Sometimes a late payment is unavoidable, so here is some information about the many ways you can quickly rebound. First, creditors and lenders typically don’t report payments that are less than 30 days late to the credit bureaus. Although you'll have to pay a late fee or sometimes a penalty interest rate.  As long as you make good that whole payment before 30 days past the due date (partial payment won’t keep you from being reported late), your credit score should be fine. But after 30 days is where the damage begins. That is why it is extremely important to contact your creditor immediately to let them know you are facing a late payment.  In the age of coronavirus, many creditors and lenders continue to offer temporary relief, so you may be able to work out an alternative repayment schedule, a lower interest rate, or forbearance. Be honest with your creditor because about your financial status and stick to whatever repayment plan you work out. Once a late payment is reported to the credit bureaus, it can stay on your credit report for seven years. While it impacts your credit hard at first, as time goes on and as long as you minimize late payments, the less impactful that late payment becomes. But what if you’re really late? After 180 days of not making the minimum payment, a creditor may “charge off” your debt and close your account. You’ll still owe the full payment on your debt, but the lender has taken it off their books and it could end up with a debt collector who could add more fees to the debt. And even after you make full payment on a "charge off," it will affect your credit for seven years.

SOURCE: Next Advisor

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