How to Avoid Late Payments and Strengthen Your Credit

Everyone has months where payments are more challenging to afford than others. However, 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, as 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.

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.

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.

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.

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.

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.

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.

Frequently Asked Questions

How Long Do Late Payments Stay on Your Credit Report?

Late payments can stay on your credit report for up to seven years. However, their impact on your credit score will lessen over time, especially if you maintain a good payment history after the late payment.

What Happens if You Miss a Payment?

Missing a payment can lead to late fees, increased interest rates, and a negative impact on your credit score. If you miss multiple payments, your account could be sent to collections, which can further damage your credit score and make it more difficult to obtain credit in the future.

How Can I Ask for Late Payment Forgiveness?

If you have a good payment history and miss a payment due to an oversight or financial hardship, you can contact your creditor and request late payment forgiveness. While there’s no guarantee they will grant it, some creditors may be willing to remove the late payment from your credit report as a one-time courtesy.

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.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. Our team of experts is here to help you navigate your financial journey and ensure you have the support you need to achieve your goals.