The best solution to a situation where you are behind in payments is to pay the entire amount. However, if you are unable to pay the full amount, talk with your creditor about payment options that can help you get back on track. Creditors will usually negotiate to make your payments less expensive.
Late payments attract fees
Late payments fees can be a powerful tool for increasing your payment speed and encouraging customers to pay promptly. After an invoice is due, a fee will automatically apply to it. In some cases, it may be possible to give a grace period before the payment due date. Some accounting software allows you to set up automatic late fees when an invoice becomes overdue.
Late payments fees continue to be a major source of income for credit card companies. The CFPB estimates that credit cards generated approximately $12 billion in late fees in 2017. In fact, more than 175,000,000 Americans had credit cards in 2017. Even though late fees have been around for a long time, their volume is on the rise.
Impact of late payments on credit score
Late payments can negatively impact your credit score. A missed payment could leave your credit score for up to six-years, making it more difficult to get loans. There are options to reduce the impact. Although a late payment can seem severe, your credit score will rebound with hard work and patience. By making minimum payments, you can improve your on-time record and reduce your debts to help your score.
Your credit score can drop up to 180 points after one late payment. If you make multiple late payment, your score may drop even further. Each time you make late payments, your score will drop by about ten points.
Remediation options for late payments
Late payments can occur for a variety of reasons. Sometimes you might be unexpectedly laid off. Or you just can't afford all the bills. In these situations, creditors can be difficult to reach. Fortunately, there are remedies available.