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Why Is It Important To Pay Your Bills On Time, Every Time?

A late payment is simply a payment that you have not made to the lender before the due date. This happens to the best of us as we can make mistakes due to oversight or shortage of cash. Unfortunately, these mistakes will negatively affect your credit score and cause it to drop dramatically as your payment history is the key component used to calculate your credit score.

In this article, we will discuss how late payments affect your credit score, the other potential penalties, and tips on how to keep your future credit in tip-top shape.

THE EFFECTS OF LATE PAYMENTS ON YOUR CREDIT SCORE

You know that late payments can negatively affect your credit scores. However, you may not be aware of how much your credit scores can fall or how long it will take you to repair the damage. You should because credit scores can boost or drain one’s finances.

According to Experian, a single 30-day-late payment will lead to the ding of 90-110 points if you have a good credit score of above 780 and a drop of 60-80 points if you have a score of say 680. However, the number of points that your credit score can drop when a late payment is added to your score depends on many factors. The FICO scoring models will consider all the points given below to determine the impact a late payment will have on your credit score.

  • It depends on how long you wait before paying the bill. Your payment will be reported after 30 days past the due date and again after 60 days, then 90 days and then again after 150 days. The longer your bill goes unpaid the greater will be the impact on your credit score. And after that, your account will be written off as a loss of charge and that will be very bad news for your credit scores.
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  • Late payments that have occurred in the past year do more damage than from several years ago. So, your recent credit history severely harms your credit score but this negative impact lessens over time.
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  • The number of points your credit score can take a ding also depends on the number of late payments on your credit report. If you have many late payments already then you are on the low end so the addition of one more late payment may not cause a lot of damage to your credit score as most of the damage has already been done.
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  • The amount of your late payment can also play a role as a small amount of say $200 and $300 will not harm your credit score as say a $300 and $3000 late payment. So the more you owe the more your score drops.

OTHER POTENTIAL PENALTIES OF LATE PAYMENT

  • You will usually be charged a late fee by the lender and if you continue to miss the due date you can be charged additional late fees too.
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  • The interest rates of your future loans will increase.
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  • Your interest rate can be reset to a penalty annual percentage rates (APRS) or default, depending on the creditor’s policy. Credit cards penalty APR can go up to 29.99%
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  • You can also forfeit your 0% promotional rate on a balance transfer card if you have one and it can be reset to the default interest rates. So, you will pay much more interest on your outstanding balance if this is done.
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  • It will remain in your credit report for seven years so you may not qualify for a mortgage (at the best interest rates), get a personal or auto loan, or even receive the best credit cards or rewards programs.

HOW TO MASTER YOUR LATE PAYMENTS

You may be just forgetting to pay your bills or struggling to pay your bills, or just forgot to pay one small bill. Either way, there are ways to master your late payments.

  • You should select a payment due date that coincides with your paydays or a time when you pay all your bills together. Many credit card issuers do allow you to select a due date.
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  • Set up bill payment email reminders or text alerts that will remind you about the bills that are due in a few days. If you require more than one alert you can set up multiple electronic prompts.
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  • Consider setting up automatic payments, especially if you have made late payments in the past due to forgetfulness or being too busy. However, you should ensure that you have sufficient funds in your account so that you do not get to pay overdraft fees. Once you start paying your bills on time your credit scores will begin to improve over time.
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  • Even if money is tight you can review your budget. You may be able to find ways to cut back on spending and make it easier to pay your bills on time
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  • Prioritize which payments you need to pay if you do not have sufficient money to pay all bills. The essential bills like mortgage, rent, and utilities should be paid first. Then pay the bills that have a hefty late fee. Finally you can pay the bills that are about to go into collections.
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  • Finally, a smart move would be to set up an emergency fund that will help you when you have unexpected expenses.
 

 If you need help to improve your credit scores do contact our financial experts at Zinucreditrepair.com.

Don’t Fall into Deferred Interest Credit Cards over the Holidays or You’ll Pay 27% More Interest.

 

America is a paradise for shoppers with a multitude of retail stores that offer foods, electronics, clothing and much more. The savvy shoppers often make a sport of looking for the best prices through sales, discounts offers, perks, interest-free deals and much more. 

Many shoppers may prefer to use store cards instead of their everyday Visa card for shopping as many stores have their own cards and offer better deals. The holiday season is fast approaching and retail credit cards can really save some money. It can also help counteract the ballooning effect that holiday gifts can have on their spending.

Are store credit cards a good deal?

When checking out at a retail store we often come across stores offering 12 months or more free financing, if you apply for their credit card that very day. Chances are that you will be hearing this a lot more often if you accelerate your holiday shopping.

 No doubt these financing offers are very tempting for holiday shoppers-and many take the bait-but are stores credit cards really a good deal? The answer is yes if it is used smartly.  But, before agreeing to apply for the store credit card there is one hidden trick you must be aware of otherwise your “free financing” can backfire in a very big way.  One common miss-step will end up in you paying 25% to 28% more interest on purchases you make.

According to WalletHub, “the trouble arises due to deferred interest”

The difference between 0% Intro APR Cards and deferred interest cards

If you want to make a large purchase with a store credit like a home appliance you may qualify for special financing. Store Credit cards that offer free financing are 0% Intro APR cards and deferred interest cards.

You might reasonably assume that they work the same way, but they are different. You get 0% APR which will allow you to pay back the purchase money with no interest for a specified period such as 12 or 18 months. With Introductory 0% APR you will not be charged interest during the promotional period and interest will start to accrue only on the remaining balance. But on the other hand, differed interest cards are particularly dangerous.  You will be charged interest not on the balance amount as in a 0% APR but interest will be charged on your entire purchase amount.

The Trouble with Deferred Interest  Credit Cards

This is a feature which is commonly found in the fine print of 0% store financing offer plans and particularly dangerous. It is like a wolf in sheep’s clothing as it pairs an enticing offer like “no interest if paid in full” or “special financing” with a clause that can turn sour. Many retailers do not disclose deferred interest clearly enough.  If you make even the slightest mistake of not paying back the entire amount by the end of the interest-free period it can lead to some expensive post-holiday shopping surprises.

With a deferred interest, finance offers you must pay off the entire amount in full before the promotional free financing period is over. If you do not do so then you will have to pay the full amount of interest charges as if the interest rate was effective the whole time. The moment the promotional period is over the “deferred” interest rates comes rolling back, not just the balance amount you owe but on the entire purchase amount.

Let us look at an example as to how much a deferred interest card can cost.

If you had 12 months to pay off a purchase of $1,500 and you had paid $540(minimum payment of $45 dollars per month) at the end of the financing period. The store will then charge you 12 months of interest on the balance which will be a walloping $321 in interest. In addition, you will still owe the $960 balance on your purchase. Whew!

This is by far the biggest negative that is associated with credit cards. The interest rates of biggest retail-branded credit cards are often sky-high, with a standard 24.99% to 27.99% APR. In comparison “the current average interest rate for all credit cards is 13.08% APR”, according to the Federal Reserve.

So before using a “deferred interest” store card you should plan to pay off the loan before the promotional period expires, as sometimes “unexpected things occur and you may not be able to make the payment every month”, says Bowne.

Avoiding getting surprised by the deferred interest

This is how you can take advantage of zero percent finance offers by considering the following precautions:

  • You should make sure you read the terms and conditions carefully to see if the card carries an annual fee, You should also know what the go-to APR will be once deferred-interest promotion period expires.
  • You can plan to have it paid off early by dividing the purchase price by 11 months instead of 12 months.
  • Pay your balances each month by setting up the payment on auto pay. In this way, you can boost your chances of paying it off in time.
  • You should avoid any extra trips to the store to avail of offers on “card member” sales and only purchase what you want.  

No doubt store credit cards offer you much better deals and discounts then typical cash back cards.  You can save loads of money if you are a frequent shopper. But just remember not to leave a balance because “deferred interest” will always destroy any savings and rewards the cards have offered. 

For more updates  call us at  our toll-free number(800) 400-ZINU(9468)