Being Late is a Big Deal
Yes, it is a big deal if you pay your bills late, especially your credit card bills. And it’s not just a pattern of late payments that you should be concerned about. Even one late payment could lead to serious trouble.
A late payment on a single account could lead to higher rates and fees not only on that account, but on all of your accounts, even on your auto insurance. More often, companies are looking at your credit report regularly and finding reasons to justify raising your rates.
Some of the big credit card companies have started aggressively instituting penalties for customers who show any sign of trouble anywhere in their credit report. Just one negative report from any creditor can trigger a rate hike.
Falling behind on one bill could cause the interest rate on one of your credit cards to shoot up. If that sounds ridiculous to you, there are many experts that agree. The lenders, however, feel justified in this practice because they are looking at risk factors. If someone falls behind with another creditor, they feel that it is an indicator that the customer may become delinquent with them as well.
Naturally, when this happens many people feel blindsided by these rate hikes, especially if they haven’t been late with any payments to that company. The companies respond that this information is all included in the inserts that come with their statements. Unfortunately, most people learn about this the hard way.
Fair or not, if you have trouble with one account, your rates may well go up on another card. You have to be aware of any limits on credit cards. If other creditors look at your credit report and see your balances going up, then you are late on a payment, you are then considered a greater risk, not just with the creditor that you paid late, but with all of your creditors.
Unfortunately, it doesn’t stop there. Some auto insurers are now using credit data to help determine your insurance rates. Apparently there is a statistical connection between your credit record and the likelihood that you will file an auto insurance claim. Drivers with poor credit file 40 percent more claims than drivers with excellent credit, according to one study. Therefore, any black marks on your credit report could also raise your auto insurance rates.
The key is to realize that your credit record does affect your other costs, including your auto insurance. If you are having credit problems, you should stay with your current auto insurer until your credit record improves. If you do decide to shop for a new automobile insurance policy, be sure to ask the insurer if they use credit data in determining insurance rates, as not all companies do.
Here are some ways to protect yourself from the consequences of a late payment. You should keep a list of all your accounts, due dates, balances and credit limits in a place where you can refer to it often. If an account’s payment due date falls at a time of the month when cash is usually tight, you should call the issuer and ask to have the due date changed. You need to monitor all of your accounts carefully and check your credit report at least once a year to verify its accuracy correct any errors. Most importantly, you need to get in the habit of paying all of your bills on time, even if that means paying them as soon as they arrive. If your payments are never late, then you will never have to deal with the unpleasant consequences.