Nobody intentionally misses a payment, mortgage, loan or on credit card, but it is a regular occurrence, most often simply because they have not got the money. If you are absent-minded then the best solution is to get your bank to make automatic payments but if you have insufficient funds your bank will not transfer the funds. There are implications of falling behind with your financial commitments and you need to understand them.
If you lose your job you may suddenly find you cannot meet your bills and the future looks bleak. During the recession, that was widespread and there are still people who have a damaged credit score because of what happened then. The score has seven years of history so gradually the damage will disappear but if you continue to miss the odd payment, negative data will continue to harm your chances of obtaining finance at the most competitive rates.
There is more to it than your credit score. If you are in financial trouble there is the stress involved, and often telephone calls and letters demanding you pay. You have to act even though it will neither be easy or pleasant getting your way out of trouble.
Late or in Default
If you are more than 30 days behind with your mortgage, you are in default. However, in terms of student loans, that term extends to 279 days. The terms and conditions of federal student loans tend to be somewhat easier. In any event, there are penalties for defaulting as well as the impact on your credit score.
There will come a point with your mortgage when the mortgage company will start foreclosure proceedings if you are too far behind with your payments. In terms of federal student loans, the government has the power to get an order whereby up to 15% of your monthly pay check can be taken and you cannot avoid your debt by declaring yourself bankrupt.
While you may not find it pleasant, you must talk to your creditors; they may have some answers that can ease your problems but even if they don’t, they will appreciate your communication.
It is essential that you don’t simply ignore your debts and assume somehow they will magically disappear. Fees will mount while your credit score will fall.
In terms of a problem on a student loan, you may qualify for a Federal Loan Rehabilitation Program. If you then make prompt payments in nine of the next ten months, you will lose the default stain. Unfortunately, such a program is rarely available for other debts.
If you want to be able to obtain finance in the future you must try to improve your score. There is $5,000 credit available via installment loans if you have a poor credit score but you will find the interest rate charged higher than the norm. It takes time to repair that score but it can be done.
If you are carrying expensive debt such as that on a credit card, you need to check your monthly spending and ideally try to pay off your balance. Even if you pay a point or two above the norm, a personal loan to pay off that expensive card debt will save you money in the medium term. If you can prove you can afford the repayments, you should be approved, and every time you make a timely repayment, there will be a positive entry put into your credit history.
You should keep your credit card accounts open because the ratio of debt against available credit is a factor in your credit score; just don’t build up a balance again because you will be charged that high rate of interest on any balance.
There is no doubt that it is worth the time and effort to get your finances in order. Your credit score is something that even potential future employers may refer to when they are considering you for a job.