How To Make Sure Your Bills Get Paid On Time
Just one late bill payment can be incredibly damaging to yr credit score. For instance, just one late payment on a personal loan can lower a score of 640 to 555. Ironically the better your credit score is the more the late payment can hurt your score.
Why is life so cruel in credit land? How is it possible that you can be punished for being good? You have to remember that the purpose of the credit rating system is to help lenders look for any sign that you may default on a loan. The first sign that you may do so is any evidence of late payment.
As payment history makes up more than a third of the typical credit history, making sure that your bills are paid on time is absolutely essential.
Even though the best thing to do is pay your bill a day or two early, you should also not panic if it is a day or two late. There is no guarantee that a lender won’t report a credit payment that is a day or two overdue however typically most lenders do not report late payments unless they are 30 days or more overdue. The fact that most lenders behave like this could give you a little bit of a break.
Still, this does not mean you are safe – this is merely a trend that could change at any minute! Also the creditors are more than happy to slap you with one of their late fees and also jack up the interest on the money borrowed with higher interest rates.
Speaking of high interest rates did you know that just one late payment reflected on your credit report could affect all of your credit card offers and insurance policy offers? All creditors and insurers use your credit report to determine what kind of rate they would like to charge you.
The bottom is line is that you must pay your bills on time every month to avoid this type of highly destructive reporting from lenders.
To stay on top of what you owe to whom and when you should make a list of every bill that you must pay each month and when it is due. Although credit card dates vary, schedule that payment a day or two before the actual due date.
Next make a list of bills that are due less regularly. These are the ones that are due bimonthly, quarterly, every six months and annually.
Now using either a paper or electronic calendar enter all of your bills and make sure to get in the habit of paying all your bills regularly.
If you are not sure about how to get organized when it comes to paying your bills there are plenty of electronic and automatic reminders that can help you remember to pay on time –
• If you have a Palm or other personal data assistant it can be programmed to alert you.
• You can program your cell phone to send you an alarm or message when your bill is due.
• Many Internet Service Providers such as AOL and MSN provide email reminder services.
• Quicken and Money are good computer programs that can help you keep track of your monthly budget.
Some phone companies such as Bell Canada and some credit card companies such as Discover will email you when your bill is due.
Another way to make sure your bills are paid right on time is to simply schedule everything as an automatic payment through your bank account.
An automatic payment (also known as direct debit) allows the companies that you owe to take their payments directly from you checking account each month. A lot of people resist this option as it feels like an invasion of privacy. In reality nobody has access to your account. It is like writing a paperless post-dated check. They don’t have the power to see into your financial information through the computer screen somehow.
Also federal law prohibits vendors from taking out more from your account by automatic payment t hen you authorize. If a mistake is made he company is obliged to immediately return the money it took in error plus any interest.
Another reason that many people resist automatic withdrawal style payments for their bills is that they are afraid of not having the balance in their account to pay it. This is very true of people who have bad credit or who are chronically in debt.
It is always a good idea to always keep about $1000 in your account to cover automated payments or to get overdraft protection from your bank so that a payment is never bounced. An overdraft is a small line of credit that usually costs about less then $50 a year.
If you don’t like the idea of letting vendors have access to your checking account you also have the option of having automatic payments deducted from your credit card. Using a credit card can give you an extra bit of protection should a mistake be made as the credit card company can act as the middleman if you have to dispute a mistake.
However don’t put all of your bills on a direct debit on a credit card unless you can promise that you an accomplish the following –
• Pay your credit card bills off in full each month so that you are not paying interest on basic monthly expenses
• Restrict the use of automatic payment on credit cards to smaller bills so that your monthly debits do not sabotage your credit score by approaching the credit limit every month.
Another very convenient way to pay and organize bills is to use one of the many online systems that are available as part of online banking. One of the advantages to paying a bill like this is that it leaves an electronic trail that shows exactly when the bill was paid so you are never at a loss for a confirmation number as proof should the payment be disputed. Another handy use of online banking is that it can stop vendors and lenders who deliberately process your payments late from slapping you with a late fee.