The Value of On-Time PaymentsMarch 09, 2022
The Value of On-Time Payments
When you take out a loan, making on-time payments each month is vital to having a good credit score. But how critical is it to make your payments on time, and what can you do now to help improve your credit score if you’ve made the mistake of missing payments in the past?
Your payment history accounts for 35% of your credit score – the highest percentage of any other category.
The typical timeline is as follows: 30 days, 60 days, 90 days, 120 days, and 150 days, after which it is written off as a loss and classified as “uncollectible.” Therefore, it is crucial to keep up with payments. In addition to harming your credit score, persistent late payments may result in higher interest rates, late payment penalties, reduced credit limits, and even court judgments.
Are you having difficulty making timely payments?
Call your lender company if you know you’re on the verge of missing a payment. On rare occasions, if you notify them ahead of time that you may be late, they may make a note on your file. If you have it, you can also provide the payment confirmation number from your online banking.
You can also consider payment deferrals and refinancing, both of which are preferable to being late or missing a payment.
How to Develop Better Financial Habits
If you’ve missed a payment or two, it’s essential to focus on developing better credit habits as this will help improve your credit score in the future:
- Maintain a credit utilisation rate of less than 30%
- Track your credit score with a credit score tool
- Limit the number of times you apply for new credit
- Ensure you have a plan to get back on track with paying your bills on time
- Configure automatic payments
- Use tools such as bill tracking and reminders
What are some helpful hints and tools?
There are a few simple steps you can take to avoid being late with payments:
Get a Head Start on Your Bills
Your existing bank account will have the necessary tools to help you predict your future bills and balances, so you know how much money you’ll have at the end of the month. In addition, your bank will send out reminders and alerts to help you pay your bills on time and warn you when your balance is low.
Set up Automatic Payments
You can configure automatic on-time payments with your bank; however, you must ensure there is enough money in your account. Otherwise, you risk incurring costly bank and Non-Sufficient Funds (NSF) fees.
Create a Budget to Keep Bills Tracked
Create a list of all your current monthly payments, including interest. Of course, you should pay off your highest-interest debts first. If you’re paying a high-interest rate on your debt, it might be a good idea to transfer it to a lower-interest account if possible.
Then, on your phone or calendar, begin scheduling reminders or notifications.
If forgetfulness is your biggest challenge, you can also set aside one day each month to pay all of your bills. This tip, however, may not be feasible if your income is irregular or your cash flow is unpredictable.
Monitoring your score is one of the most effective ways to get your finances back on track. SupaSmartLoans has teamed up with a reputable credit report provider. To get a copy of your latest report to see how lenders view you when making a lending decision on your loan application, click here.