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Your bills are due and you’re spread too thin. Something’s going to give, so you might have to miss a credit card payment. Before you decide to skip your monthly payment, you should find out what will happen. You will then know if it’s worth it or if you should find a way to come up with the money to make your payment on time.
Credit Bureau Reports and Credit Scores
Your credit score can take a hit if you miss a payment. Creditors report late payments to the three major reporting bureaus and those bureaus will lower your score by as much as 100 points for a single missed payment. It is important to note that only extremely high scores take that big of a hit for one missed payment. It is more likely that your score will drop by less than 100 points, but it can still be a significant problem.
A lower credit score means it will be harder to get credit. You can even have trouble getting employment if your credit score goes down, so you should do everything in your power to keep this from happening. Otherwise, you might spend lots of time trying to get your score back to an acceptable number.
It’s not all doom and gloom though. Creditors cannot report a late payment until 30 days past the due date. That means if you make your payment on day 29, you are in the clear for the month.
Some credit card companies might jump the gun and report you. If that happens, you need to file a dispute. Keep a copy of your bill and payment confirmation on hand so you can prove that you made the payment before day 30. As long as you can prove that you made your payment within 30 days, the credit bureaus will have to take the item off your report. Then, your score will go back to where it was before you were reported.
If you can’t afford to pay your credit card on time, you probably can’t afford to pay extra fees either. Unfortunately, credit card companies tack on the fees if your payment is late. Don’t look for the extra fees right away, though. You have a minimum of 21 days after the due date to pay your bill. After that point, the credit card company has the option to assess additional fees. Read the fine print to find out how much you will pay.
Higher Interest Rates
Before you miss a payment, pull out your credit card contract and read it. Some companies increase interest rates if you’re late. This increase typically kicks in after you’ve been delinquent for 60 days. At that point, you are charged the penalty APR rate, which is often the highest interest rate the company allows. Luckily, you don’t have to keep the penalty rate forever. Make your payments on time for six months and your interest rate should go back to normal. Alternatively, you could be proactive by trying to lower your interest rate with a balance transfer credit card promotion.
However, there’s one problem. You’ll probably only get the old interest rate on your previous balance. Any purchases you made with the new interest rate will likely still carry that higher rate.
Embarrassing Phone Calls
Don’t be surprised if your creditor calls right after your missed payment. Some companies are known for doing this more than others. Chase, for instance, tends to pick up the phone as soon as you miss a payment, while Capital One gives borrowers a little more time. If you don’t want to get embarrassing calls at the most inopportune moments, it is a good idea to pay your credit cards on time.
If you just miss a single payment, you can get back on track quickly. However, if you miss 180 days of payments, your credit card company will likely charge off the debt. The creditor will write the debt off, and you can expect a wealth of problems to ensue. You will be sent to collections, and these collectors will do everything in their power to get the money from you. Instead of just making monthly payments, you will be expected to pay the debt in full or come up with a substantial amount of money for a settlement. It is best to prevent this from happening.
One late payment isn’t the end of the world. Do your best to get back on track quickly so you can avoid any major problems. If you can take care of the payment before 30 days are up, it will be like the late payment never happened. Then, it will be easy to stay in control of your credit score and your debt.
Author: Jeff Gitlen
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