The Importance of Timely Payment in Credit Repair

One of the crucial activities of the credit repairing process is maintaining timely payment. Your payment history directly impacts your credit score. Experts claim that 35% FICO score (Fair Isaac Corporation) belongs to your payment history. FICO is an American data analytics company who analyzes data of credit. Through FICO scores, lenders determine credit limits by assuming whether the person is capable of repaying the loan or not. So, late payment has a great impact on negative scoring of credit history.

How Late Payment Affects Credit Score

Credit bureaus categorize late payments on the basis of how overdue they are:
● 30 Days Overdue: It will decrease your credit score and it may stay on your report up to 7 years.

● 60-90 Days Overdue: It may directly show a pattern of financial instability in your credit report

● 120+ Days Overdue: It is considered as severe carelessness regarding your credit. It damages credit scores. It leads to debt collection. Several times these types of accounts have been closed by the authorities. Impacts of late payments stay on the reports for 7 years. But you can improve your credit history by taking necessary steps and maintaining consistency through paying on time.

Benefits of Paying on Time

1. Improves Credit Score: Maintaining consistency in timely payment must improve credit score.
   
2. Helps in Better Loan Approvals: Lenders are always interested in those credit holders who are always outstanding in payment history. Also, often lenders like to offer favourable items.
   
3. Decreases Interest Rates: A good credit score represents lower interest rates in accessing loans and saves money over time.
   
4. Prevent Penalties: Paying on time prevents penalties like unnecessary charges.
   
5. Protects Against Collection and Legal Action: Consistently late payment may lead to debt collections and legal actions. Sometimes it may cause account closing. So, timely payment can protect you from these severe problems.

Strategies to Ensure Timely Payment

1. Automatic Payment: To ensure the timely payment each month, you can use auto-pay features of your bank. It will cut the exact amount automatically from your account on time.
2. Payment Reminders: In case of forgetting the payment date, you can set reminders in your phone’s calendar to get reminders of payments or you can sign up for emails or texts reminders from your creditors.
3. Create a Budget: Try to create a budget of your expenses for the full month. Allocate a fixed amount for your loans or credit cards to avoid unnecessary expenses and money shortage for paying loans.
4. Pay More Than the Minimum: If possible, try to pay a little bit more than the minimum each month. It reduces interest rates and sketches responsible financial behaviours to the lenders.
5. Negotiate Payment Plan (If needed): If you face struggle in paying debt, you can share your problems to the lenders and ask for a comfortable payment plan. Many lenders offer temporary relief to borrowers to get them back on the payment track.

How to Recover from Late Payment

If you have already made a late payment, here are the ways to minimize negative impacts on your credit history:

1. Adjust the Missed Payments: If possible, pay any outstanding amounts as soon as possible.
2. Request a Goodwill Adjustment: If you have on-time payment history in the past, request your creditors to settle the late payment facts. Sometimes, lenders remove late payment reports from credit based on borrowers’ good payment history.
3. Dispute Inaccuracies : If late payment was reported as an error, dispute it with the help of the credit bureau (Experian Dispute, Equifax Dispute, TransUnion Dispute).
4. Focus on Future Payment: If you already have made a late payment, try your best to get back your consistency in paying on time.

Timely Payment is nothing but a queen of the chess board. If you lose it once, you will lose everything. If you fail to maintain the consistency in payment history, your credit scores will decrease gradually and end in legal actions or account closing. So, by practicing responsible financial habits, you can ensure a strong and positive credit score.