You can resolve your situation by paying the entire amount owed if you have fallen behind in payments. However, if you are unable to pay the full amount, talk with your creditor about payment options that can help you get back on track. Creditors are usually willing to negotiate for lower payments.
Late payments attract fees
Late payment fees are a powerful tool to increase payment speed and to encourage customers to pay in time. After the invoice has been paid, a fee will be automatically applied to it. In certain instances, you might be able offer a grace time for payment before the due date. You can configure accounting software to automatically apply late fees to an invoice that is past due.
Late payments fees continue to be a major source of income for credit card companies. In fact credit cards were used to pay more than 175,000,000 U.S citizens in 2017, and the CFPB calculated that they generated $12 billion in late fees. Although late fees exist for a long period of time, the volume of late fees is rising.
Impact of late payments on credit score
Late payments could have severe consequences for your credit score. A missed payment can be reflected on your credit history for up six years. This may lead lenders to see you as a high risk applicant. There are many ways to mitigate the negative impact. Even though a late payment can have a severe impact on your credit score, it is possible to reverse the trend with patience, hard work and perseverance. By making minimum payments, you can improve your on-time record and reduce your debts to help your score.
A late payment can lead to a credit score drop of up to 180 points. Your score could drop even further if you make multiple late payments. Your score will fall by approximately 10 points each time.
Options for resolving late payments
Late payments can happen for many reasons. Sometimes you might be unexpectedly laid off. Or you just can't afford all the bills. You are in a tight spot with your creditors in such cases. There are options.