Money - Personal Finance
By: - at February 18, 2013

How Late Payment and Minimum Payment Affect Your Credit Scores

How Do Late Payments and Minimum Payments Effect Your Credit History?
Past Due PaymentsIt is a fact that many people simply forget to make credit card or utility payments from time to time.  It is also true that many people just simply ignore making a payment on time for other reasons.  There are also some consumers or customers who make only the minimum payments which adversely effects their credit score.  The reasons for not paying are irrelevant because no matter what your credit report gets marked in the same negative fashion.  Depending on your payment history and who you owe money to will alter the ways in which your credit score will be effected.

Adverse Effects of Late Payments on Your Credit Score
Credit ScoresIt is possible for your lenders to forgive one late payment if you have been paying on time for awhile.  In that case, if you make a late payment, this late payment would not be reported to the credit reporting agencies or companies by the creditor.  So your credit score will not be vulnerable by one late or missed payment.  So it is possible that your lender or creditor may overlook one or two late payments if you have a very good payment history with them.  Your credit will be changed depending on how many late payments you have had in the past.  For example, if a single or two late payments occurred several years ago but ever since then all payments on all your accounts have been made on time, then those late payments will have very little negative impact on your credit score.  Another important thing that is taken into consideration is how severe a late payment was.  It means how late the payment was which is recorded in days, weeks, or months.  The later the payment the more negatively your credit score is altered  The other important factor to be aware of is whether or not you already have accounts with a credit rating agency.  The more accounts you have with credit rating agencies, the more adversely impacted your credit score will be.

Pay More Than the Minimum Payments
Minimum PaymentsWhile it is a great idea to make minimum payments to prevent yourself from defaulting on an account, it actually can have a negative effect on your credit score.  If you are able to make more than minimum payments, then defiantly make much more substantial payments because it will make your credit look more appealing to lenders.  Also, remember that if you are always dependent on minimum payments for a credit card balance, you might just end up paying forever without actually getting rid of the credit card debt.  Interest accrues so much on credit card balances that pretty soon you will only be paying off interest charges and not the principle.

Therefore, it is strongly advisable to make payments on time and make more than minimum payments for any kind of bill or payment to keep your credit score clean.





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