I heard from several people this week saying they forgot to make a payment on their credit card or auto loan, and asking what they should do.
I will tell you straight up: missing a payment can devastate your credit score. If your score was top tier, it can topple by 70 points in a day! Why?
Because the credit bureaus think something terrible has just happened in your life, and now you are high risk.
If your score was mediocre, then missing a credit card payment can drop your score by 30 to 40 points. That’s still enough to knock you out of qualifying for a good auto or home loan.
There is no grace for “I forgot.” If there was an extenuating circumstance, such as one of the following, you might get some grace from the creditor:
- Loss of income due to the impact of Covid-19.
- Death in the family.
- Natural disaster, such as a hurricane, tornado, or flood.
If you had one of the three circumstances above, contact the manager and have a discussion. Two of my book readers got their late payments removed and late fees reversed due to having a natural disaster and resulting loss of income.
On the other hand, if your missed payment was due to sloppy financial management, you are not going to get any sympathy. Here’s what I recommend:
How to Avoid Late Payments
- Set an alarm on your cell phone the day before and the day of a payment being due.
- Write on a calendar payment reminders.
- Post a notice on your bathroom mirror and on your refrigerator. Some people needs lots of visuals.
Additionally, you can set up automatic payments; but don’t set the date of payment on the last day, because that can backfire if it falls on a holiday or weekend. Set the pay date early. And, pay attention in case your creditor sells the account, which will require you to adjust your auto-payment in order to prevent it from going out (and causing a late payment).
Cleaning Up Bad Credit is Like Cleaning the Floor
You cannot mop up the mud while you are wearing muddy boots and expect to have a clean floor. Likewise, how can you repair your credit when you are missing payments currently? You cannot.
If You Made a Mistake Recently…
Learn from your mistake and take action so it doesn’t happen again. Use the three ideas above. Ask for grace if you might qualify. People make mistakes and life goes on. Onward and upward!
Thank you for reading this article. I wish everyone the best with your finances and credit.