Among the things, most people strive to keep positive in life is their credit performance. You will never know the importance of a good credit performance until you reach out to your bank for a loan, and you can’t get an approval. Therefore, meeting your financial obligations early enough as expected should at all times be on your priority list.
Among the things that can affect your credit performance is late payment. When you approach any lender seeking a loan, among the things that will determine whether the loan is advanced to you or not is your payment history. Lenders look at various factors regarding your finances before considering your loan request, and payment history account for 35% of your credit score.
While some late payments are a genuine error on your end e.g., forgetfulness, others could be failing to make payments due to financial shortcomings. Therefore, the question that you could be battling with is; how do late payments affect your credit performance?
Here is how late payments affect credit performance:
A bad score will depend on whether your late payment has been reported to a credit agency. The longer you take to clear a late payment, the worse the score on your credit gets. Paying in less than thirty days from the day of default is usually the best step to take. Creditors at times adhere to guidelines on making late payment reports hence allowing a period of up to thirty days for one to pay before making a report. However, if you take 60, 90,120, or more days to make a payment, living with a bad score for several years will be your new normal.
Late payments stay on credit reports for seven years: One factor that you should be aware of is that once you have a bad credit reputation. It goes down into credit reports for seven years.
Damages score for two years: Even after you gain track and start making your payments on time, your score will be damaged for around two years hence giving you a hard time when seeking loans.
Here are some of the late payments that can land you in bad books with your creditors:
Making a late payment on rent
While some people might view late payments of rents as a small financial constraint that can be solved once they get their finances right. You should never treat your rent payment the same way because a single late payment of your rent might significantly injure your Credit score.
- A late payment on your credit card
Never ignore any payment related to your credit cards because your credit performance depends on them to get you in good credit books with other creditors.
- Unpaid fines
Walking into a library and renting your favorite novel for a week is always a good thing. However, most libraries have their own policies on book renting, and one of the policies involves imposing fines on overdue book rentals. Therefore returning a book after the due date without paying the requisite fines might have you reported to the credit agency.
- Car loan and mortgage late payments
A house and a car are among the two most valuable assets in life. Affording one of these assets is something most people work a lifetime to attain, but loans have made it easy to afford for many people like you. Therefore your financier will advance you the loan with the trust that you will be able to pay. If you default on a payment without a probable cause, your financier can choose to report you to a credit agency.
- Late payment of taxes
Timelines on payment of taxes should be known to everyone, and any late payment can have you being reported to an agency for late payment. The IRS reporting you for tax default constitutes one of the most significant injuries to your credit performance. Therefore, it would be best if you purposed to ensure you are early in paying your taxes.
Fixing late payments
After realizing their performance on credit has greatly dropped, most people will be in a dilemma on how to fix the situation best. For late payments, the first step for you should be paying the owed amount to the relevant parties. Making the payments gets to show the willingness you have towards making good all your debts. After that, contact our credit experts from SYNERGY Credit Services and let us help you on the best way to avoid late payments and subsequently build your performance.