Late payments and debts

Late payments lead to bigger debts and worse credit histories that lead to very bad credit scores. Needless to say that bad credit scores lead to the possibility of the related individual not being able to secure future loans. The point being driven home here is that you should keep up with repayments of credit cards, loans and mortgages to avoid getting into a debt trap and also save yourself a whole load of cash in the process.

How late payments affect credit history

When you use a credit card, avail of a loan of any kind – such as a personal cash loan, business loan, mortgage, etc – and even in some cases make use of utilities such as mobile phones, you are expected to clear the bill by a certain date each month. If you fail to pay by the stipulated date the lender, Card Company, or utility service provider will report the missed, and even a delayed payment to the credit bureaus in your country. To make matters worse, there may be more than one credit bureau.

With each payment, timely or delayed, the credit bureau prepares a credit history. The data in this report is used to calculate a three digit number, which is your “credit score.” The lower the number the worse it is for you. This number explains your “creditworthiness” – your ability or willingness to repay your debt. If you apply for a loan and have a bad credit score, the lender will check up your score and may decide to turn down your application or may charge you an exorbitant rate of interest – what he is really telling you very politely is that he does not want to lend you money. But if you really need the dough you will not mind paying the higher rate of interest.

Dealing with debts due to late payments

Late payments only lead to larger debts. If you have landed yourself in such a situation, you should consider ways to repair your credit history before you get deeper into debt or before you apply for fresh credit. Keep in mind that even utility companies can report missed or delayed payments to the credit bureaus and in some countries, this leads to individuals being unable to secure flats, apartments or any kind of accommodation if they have a bad credit score.

The only way out is to repair your credit history and in doing so, improve your credit score. If you have a single or multiple bad debts that you need to repay, you should get down to working on repaying it as soon as possible. There are many ways to do so, and while it is possible for you to repair your bad credit history by yourself, you should take the help of a debt management professional if the debts are large.

Repairing your credit history

You should repay all small outstanding debts with money you may have saved up because small debts are usually the cause of misused credit cards that attract as much as 3 percent interest each month. Another way is to get debt consolidation fast loans at reasonable interest rates that can be repaid over an extended period of time. This money is used to repay all outstanding debts. This will immediately improve your credit score and will leave you with a comfortable amount to take care of your other monthly expenses.

However, once you have chosen a solution, you should never make a late payment again or this will be even more difficult to settle.

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