Your credit score plays a crucial role in defining your financial status. If you apply for a loan with a high credit score, financial institutions consider you as a low-risk applicant and this increases the chances of your loan approval. On the other hand, a poor credit report raises a question on your repayment capacity and thus hampers your eligibility to avail the loan. Thus, you should always maintain a good credit report by managing your finances wisely. One of the major reasons that leads to a poor credit report is late payment record.
Here’s a how late payments impact your credit score:
30 -60 days late: A single 30-60 days late payment should not cause lasting damage to your credit score.However, if you frequently make late payments, your credit report will be hampered significantly
90 days late: This record can hurt your credit score for up to seven years. If you miss the payment once, you’re considered more likely to do it again. As a result, your credit score will take a hit.
120+ days late: In this case, your debt is usually “charged off” or sold to a third-party collection agency. Both of these events are marked on your credit report and hence, your credit score will reduce further.
So, how can you eliminate these late payments from your credit report to avoid long-lasting damage?
- Get a copy of your report and check for errors and inaccurate information, including late payments.
- If you have defaulted a payment accidentally because you forgot the due date, you can request your lender to strike it off on the basis of goodwill. If you have a good repayment history, your lender is more likely to strike off your late payment record.
- Sometimes, before striking off your late payment record, lenders may request you to sign up for auto-debit towards payment to ensure that you don’t default again.
- You could also request the lender to remove the late payment remark from your credit report by agreeing to make a partial or full payment of your remaining amount.
Since late payments can have adverse effects on your credit score, you must always make payments on time. Here are a few tips and tricks that you can help you make timely payments:
Set up reminders: Setting up reminders on your phone can help you keep a track of your due date for payments. Moreover, you can also request your creditor to provide online alerts regarding your payments.
Weekly payments: By making weekly payments, you can easily control your overall balances and it will also allow you to repay your loan a bit faster.
Timely payment will not only boost your credit score but also prevent you from paying high-interest rates and late fee. A good credit score can be extremely beneficial while applying for a personal loan. It reflects your high repayment capacity and therefore can help you avail a higher loan amount at a reduced rate of interest.