Bills, Bills, Bills: Why You Should Always Strive to Pay On Time
In the immortal words of Destiny’s Child: Can you pay my bills? Can you pay my telephone bills?
Unfortunately, most of us don’t have someone else to foot the bill and are responsible for staying on top of those monthly bill payments ourselves. Luckily, we’re here to help you along the way, starting with a fundamental question: what happens if I’m late on payment?
Long story short—missing a payment or two (or three) will negatively affect your credit score, so it’s best to always strive for on-time payments. Below we break down why paying late affects your credit score, how it affects it, and how you can make sure to always pay on time.
Why Paying Late Affects Credit
Credit payment history is one of the most critical factors that contributes to your credit score overall — making up 35% of the total calculation.
It’s pretty straightforward: good credit signifies to banks that you are a good borrower, while bad credit tells them that you are not a reliable borrower and that extending a credit line to you poses a business risk. Having good credit, on the other hand, opens the door to increasing your credit card limits and gaining access to larger purchases.
If outside factors—such as a job loss due to the coronavirus pandemic—are affecting your ability to make timely payments, it never hurts to reach out to your issuer directly. You are not alone in seeking assistance from your provider during this financially stressful time, and many banks are offering relief measures to accommodate their customers’ needs.
How Paying Late Affects Credit
You may feel the impact of a late payment on your credit in a few ways, depending on your current standing with your issuer and how late your payment is.
Under 30 Days Late
If your payment is under 30 days late and you pay off the full amount on the account in question, then you will likely face a nominal late fee. These can range from anywhere between $25 to $35 and will show up on your next statement. Thankfully, in this situation your credit score will most likely not be impacted.
According to Nerdwallet, “By federal law, a late payment cannot be reported to the credit reporting bureaus until it is at least 30 days past due.” So if you’re within this window, you won’t see a permanent mark on your credit report. And if you have a spotless payment history, you can even call your creditor and ask for the late fee to be removed.
Beyond 30 Days Late
After the 30-day mark, the stakes for late payment get a bit higher. Any payment that is over 30 days late can result in:
1. As much as a 100-point decrease in your credit score.
The concrete effect on your credit score can depend on a number of factors, including how late the payment is, how many times you’ve made a late payment, how much you owe, and where your credit score currently stands.
2. A late payment mark on your credit report.
The three credit bureaus are highly likely to be notified after 30 days, which means that the late payment will be recorded on your report where it can stay for up to seven years.
3. An increase in your interest rates.
Some penalty APRs can be up to 29.99% and a promotional 0% APR can be revoked.
If you are ranging somewhere between 60-120 days late, you will continue to see a negative impact on your credit score. Your account can also become delinquent or be sent to collections, which can cause much more damage than any single late payment.
How to Avoid Missing A Payment
As mentioned earlier, if you are experiencing extreme financial strain because of Covid-19, we recommend you reach out to your bank issuer to see what support services they may be able to provide.
In general, these are some helpful tips to make sure that you never miss a payment again:
1. Set up automatic payments.
Set up automatic payments to your credit card each month, even if it’s just for the minimum amount. This way you will know that you are covered at the most basic level and can pay the rest off as soon as you have the means. If you’ve fallen into deep credit card debt, try these strategies to defeat it and keep it off.
2. Get notified ahead of due dates.
You can also set up reminders or alerts on your phone to notify you ahead of time to make a payment. This can be as simple as creating a calendar reminder, or as specific as setting a timed alarm on the day that you want to pay your bills.
3. Take it day by day.
You don’t have to pay off your credit card all at once. Make continuous payments throughout the month so that you don’t miss a due date and can handle the amount in increments.
4. Use Zip for better bill management.
Believe it or not, Zip’s buy now, pay later platform can help you manage your bills and avoid late payments. Yes, using Zip means that you can split any purchase into four installments over six weeks (online and in-store), but you can also use it to make payments toward your phone, internet, or car insurance bills.
Here’s how to do that in just three easy steps:
- Open your service provider in the Zip app.
- Tap “Pay with Zip” and enter your total bill amount.
- Use your Zip virtual card at checkout.
Staying on top of your bill payments can be overwhelming, but the rewards are worth it. When you know that you have your money under control you can enjoy the freedom of indulging in a dinner out or a new item from your favorite brand.
Download the Zip app to check out the better way to pay and start splitting your payments in 4 anywhere you shop.
Get started with Zip today
Zip’s editorial content is not written by a financial advisor. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.