Credit Improvement and Late Payments

If you want to improve your credit, and don't want to use a credit repair company, you may benefit from learning and understanding late payments, how they affect your credit and what you can do about them.

What You Should Know About Late Payments
Assuming you already know that paying any one of your bills late is making a “late payment, “we’d like to begin by answering this question: how late do you have to be in order for it to show up on your credit report?

Technically, even being a single day late on your payment (after your grace period, of course), creditors are entitled to report it. Fortunately, most creditors won’t report a late-pay until you are about 30 days late. After that, each subsequent late-payment is reported every month until the debt is assigned to a collection agency and/or charged off. Keep in mind that even after the debt is charged-off or sent to collections:

• You are still held legally responsible for the debt
• You are still held responsible for late fees and surcharges
• Your credit report will continue to show your history of late-payments

So if I have late payments, does that mean my creditors can:

Charge me a late fee? As long as it’s clearly stated in your contract, creditors have the right to penalize you for paying late. This, of course, is in consideration of your grace period, which is a specified number of days you have to pay after your due date without being penalized.

Penalize me without notification? Creditors, by law, must notify if you are being penalized for a making a late payment. Not only must they specify the terms of penalties they can impose for late –payments in your contract, but they must notify any time they are taking adverse action against you as a result of paying late.

Remove money from my bank account? Creditors can remove funds from your bank account to satisfy insufficient payments or penalties if, for example, you have a checking account with the bank that issued the credit card you fail to pay on. This is called right-of-offset and the bank can only do this if it’s disclosed in your contract.

Repossess my property? Lenders can repossess your property if you make a late-payment, but only if they hold a lean on the property and only if they documented in your contract that they can and will repossess the said property in the event of a default. Normally, lenders will not repossess your property because of a single late-payment. But keep in mind that new computer software helps lenders predict which cases are likely to end a repossession of property and puts the lender on notice to act immediately when a payment is late.

I have a history of late payments—how can I improve my credit?

Each late-payment can reduce your credit score by up to 50 points. That’s why it’s important to keep track of your monthly dues and always make your payments on time. If you should come across a late-pay on your credit report, however, there are ways to remedy the damage by:

Sending a dispute letter—if you feel that the late-payment in question is inaccurate for any reason, you have a right to dispute it the reporting agency. If it can’t be verified, the reporting agency is obligated to correct or remove it.

Sending a good will letter—if you have a reasonably good history with your creditors, you can send a good will letter to them and ask to have the late-pay removed from your credit report as a gesture of good will.

Establish new credit—if it’s just not possible to have the late-payments removed from your credit report, you can offset the damage to your credit score by establishing positive lines of credit. Managing your credit appropriately is one of the best ways to improve your credit.

Creditors Just Aren’t Cutting Breaks Anymore

It used to be that if you were late in making a payment, your creditors would wait about 15 days and send you a late notice. The letter would be followed up by a phone call if the payment was still not made.

These days, however, creditors have tightened up against late and insufficient payments by implementing strict penalty clauses, raising interest rates and taking immediate action against defaulters. That’s why it’s never been more important for you to read never take out more loans than you can afford to pay back, read your contracts carefully, and always make your payments on time.