Everyone has months where payments are more challenging to afford than others. But late payments can have a significant impact on your credit score and make it difficult to qualify for credit and favorable interest rates in the future. Even one 30-day late payment can significantly hurt your credit scores, since your payment history is the most influential factor in calculating those scores.
Thankfully, a little planning and strategizing can go a long way toward making sure you never miss a payment due date. Here are six ways to avoid late payments on your credit report.
1. Adjust Your Budget
Having a detailed budget that tracks your monthly spending can help you take stock of your income and bill obligations. While it may seem overwhelming to start a budget, it doesn't have to be overly complicated: Track your bills and spending, and take steps to ensure you have enough income to cover your monthly expenses (and ideally put some money toward savings).
Make sure your budget lists what bills you need to pay, how much you owe and when payments are due. If there's little or no room in your budget after paying your bills, you may want to reduce your spending or find ways to earn more income until you can bring your monthly spending below what you bring in each month and ensure you have enough to make all your payments on time.
Learn more >> How to Make a Budget
2. Set Up Autopay
Enrolling in autopay is one of the easiest ways to prevent a late payment. When life gets busy, you can rest easy knowing that your payments are scheduled to go through on time. You'll just need to make sure you have the funds in your account to cover each transaction. In some cases, autopay can even save you money, as many lenders offer autopay discounts. For instance, student loans and car loans may knock off 0.25% of the interest rate when you enroll in automatic payments.
Learn more >> Autopay or Online Bill Pay: Which Should You Use?
3. Set Alerts and Reminders
Having due dates included in your budget can help you stay on top of bills, but reminders can help make sure you never forget to pay a bill. Nearly all banks and budgeting apps allow you to set up alerts and reminders of upcoming bill deadlines. It's a good idea to schedule reminders a few days before bills are due to give yourself time to review them and verify you have the funds to cover them.
4. Prioritize Your Payments
If you're tight on cash, you may need to prioritize which debt you should pay first. While not a fast rule, it's usually wise to pay credit-impacting bills like your credit card and loans before less essential ones like streaming services and gym memberships. Of course, you'll also need to focus on urgent bills, like an impending electric bill to keep the lights on. In any case, the goal is to ensure you can pay all of your bills each month: Even bills that don't affect your credit directly could cause your credit score to plunge if they're sent to collections for nonpayment.
5. Build a Flexible Payment Schedule
Making some adjustments to your due dates and payment schedules can make it easier to make payments on time. For example, you might want to schedule bill payments a few days after payday. This way, you can take care of your bills before funds are used elsewhere.
Many creditors allow you to pick your own due date, which could help you spread out payments over the month and make it easier to manage your budget. Alternatively, if you get paid only once a month, consider arranging all your due dates to fall shortly after payday.
Learn more >> How to Change Your Credit Card Due Date
6. Review Your Finances Regularly
It's difficult to know where you're at financially—and whether you'll be able to pay your bills each month—if you don't know how much money you've got on hand.
Set aside time at least once a week to review your financial position, including upcoming payments, balances in your accounts, discretionary spending and more. Regular financial reviews will help you see potential red flags before they become a bigger issue, allowing you to move money from one account to another, quickly make some extra cash or reach out to your creditor and make alternative arrangements before you risk a payment being late.
Learn more >> How to Use a Weekly Spending Review to Stay on Budget
Frequently Asked Questions
Credit payments made 30 days or more l ate remain on your credit report for seven years. If your account is still open after seven years, the account will still show on your credit report, but the late payment will be removed. While late payments may have a significant negative effect on your credit score initially, their impact gradually decreases over time if you stay current on your payments.
A missed or late payment can have serious consequences to your credit score and your wallet. If your payment is more than 30 days late, your creditor may report it to one or more of the three major credit bureaus, Experian, TransUnion and Equifax. Your credit score could drop substantially, and you could also incur late fees and penalties, depending on the type of account. For example, a late payment on a credit card account could trigger a penalty APR much higher than your regular rate. Several missed mortgage payments, meanwhile, could cause your lender to begin foreclosing on your home.
If you miss a payment, keep your lender in the loop. It's always better to contact your lender before a missed payment, but better late than never. Be sure to communicate that you're aware of the situation and are taking steps to remedy it. They may even waive the late fee.
Credit bureaus do not remove accurately reported late payments, and your creditors are also under no such obligation. However, the latter may be willing to work with you if there's a legitimate reason for the late payment. For instance, a creditor or lender may extend late payment forgiveness and remove the late payment from your credit report if you paid late due to a hospitalization, emergency, natural disaster or another hardship.
Contact your lender by phone or send what's known as a goodwill letter and explain why they should remove the late payment. Be prepared to back up your claim. There's no guarantee a creditor will agree to your request, but it's certainly worth a try.
Avoid Late Payments and Strengthen Your Credit
Late payments can lead to serious credit consequences, but you can avoid them by following proven money management tactics. Sticking to a budget that details your account balances, payment amounts and due dates is an excellent place to start. Automating your payments can also simplify the process and help to avoid missing bill deadlines. You might also consider adjusting bill due dates and scheduling payments to best suit your needs.
While you're getting your finances in order, consider taking steps to improve your credit health. Start by checking your credit report and credit scores for free with Experian to see where your credit stands. Address any issues you see on your credit report that may be negatively impacting your credit score.
