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How much will a late payment drop your credit score?
Sometimes, life happens. Maybe you went on vacation and forgot to send off your credit card payment before you left, or you did send it off (you swear!), but it was lost in the mail. Or, you just flat-out didn’t have enough money to pay a bill, so the late notices are piling up.
When that happens, you may be wondering how far your credit score will drop, as the payment becomes 30, 60, and then 90 days later – or more.
The answer is, like so many questions in life, “It depends.” However, we do have some factual information and a few guidelines to go by.
For instance, we do know that paying on time is a major factor in how our credit scores are calculated. In fact, according to FICO, payment history makes up 35% of your credit score.
That being said, there is some gray area when it comes to the credit score damage a late payment can cause.
Here are five factors that help determine just that:
- Was it a 30, 60, or 90-day late payment?
Missing a payment’s due date by 30 days is the first huge milestone that will affect your credit, but continuing to miss that payment by 60 and then 90 days will impact your score even further. Remember that credit reporting is all about gauging risk (for potential lenders and creditors). So while a 30-day late may be explainable as a mistake, oversight, or one-time error, 60 or 90-day lates show that you are really in a financial freefall. Therefore, your score will drop accordingly, so you should definitely avoid a 90-day late payment if you want to save your score.
- How long ago was the late payment?
Credit scoring algorithms also factor in recency – how long ago the late payment took place. So if a 30,60, or 90-day late just hit your credit report this month, your score will drop a lot sharper than if the same late payment occurred five years ago. But that also means that as time goes on (and you continue to make your payments on time) the negative scoring
- Was it just one account with a late payment – or more?
If you’ve only missed a payment with one credit line, loan, or account, it will damage your score a lot less than if you’ve missed payments over multiple accounts.
- What type of credit account did you miss a payment for?
Of course, the credit reporting algorithms give more weight to more important loans, like mortgages, etc. over smaller ones, like a $250 store retail card. Therefore, a 30-day late payment on a mortgage loan will hurt your score a lot more than with smaller and lesser accounts.
- How long have you had that account?
Accounts that are well seasoned – that have been open and in good standing or a long time – will take less of a hit than newer accounts. So, avoid missing payments on that brand new credit card!
- What was your score before the late payment?
Believe it or not, the BETTER your credit was before the late payment, the MORE the late will hurt your score! Are you be punished for having a great score? NO; but the credit bureaus are gauging risk, and a late payment that’s out of character for a high-scorer is more alarming than the same late for someone who commonly makes credit missteps.
A 30-day late on your credit report will probably result in a credit score drop of around 80 points IF your score was originally around 680 or so. But if your score started out at 780 or higher, one late payment could send your score plummeting by 90-110 points!
However, if you’ve missed a payment, there are some ways to do damage control. Immediately contact your creditor and work out a payment, and you can even ask them to delete the negative blemish on your credit if and when you pay.
But different lenders report on different days of the month, so you may get lucky and prevent them from even reporting a 30, 60, or 90-day late. Again, you definitely want to avoid paying 90 days late on any accounts, as that will cause significant damage to your credit – and stay on your report for seven years!
The good news is that Nationwide Credit Clearing is here to help you clean up your credit and improve your score! Contact us if you have any questions about late payments or for a free credit report and consultation!
15 Things to stop doing that are making your broke!
Many of us set resolutions every new year, and chief among them is the goal to improve our finances. For some, that may mean saving more; for others, landing a better-paying job; and home ownership is still the American Dream for most families.
But before we can tackle this financial Bucket List and move forward, it’s important that we identity the money mistakes that we’re making that are continuously setting us back. We’ve identified 18 things that are common among the average American consumer, causing them to always be short on money and even hurting their families.
So, if you want 2018 to be the best year yet for your finances, stop doing these 15 things that are making you broke!
- Maxing out credit cards
We’re certainly a nation that loves debt, as we now have more than 1 trillion in credit cards and other revolving debt, an all-time high. Add in mortgages, student loans, car loans and medical debt, etc., and U.S. consumers personally owe more than $12.9 trillion – the GDP of about half the countries in the world!
In fact, the average adult with debt in the U.S. has 8 credit accounts, $16,000 worth of credit card debt alone, and is paying about $430 a month just in minimum payments.
While there’s nothing at all wrong with having credit cards and using them responsibly (you should keep some revolving debt), the problem comes when we max them out – with no plan to pay them off.
Paying only minimum payments means that the average $10,000 balance at 15% interest will take 15 years and about $22,000 to pay off completely.
Maxing out cards also impacts your credit score, since about 30% of your FICO is calculated by the amount of debt you hold compared to your total available credit (called credit utilization.)
So stop maxing out those cards and make more than just the minimum payment this year!
- Not saving
We understand that money is tight and there’s usually more month than paycheck; not the other way around. But one of the principal ways you can ensure that money isn’t always this tight in the future is to start saving. And there’s no better way to put away funds for a rainy day than automatically saving out of every paycheck (or tax refund).
In fact, the majority of Americans couldn’t even come up with $600 today without borrowing or selling something, and sudden financial setbacks like a job loss, medical problem, broken car or other unexpected expense can send about 40% of families into dire financial circumstances.
The best way to combat that – and make sure that you’re always prepared and won’t make even worse short-term financial decisions – is to save a certain percentage of your paycheck automatically, before you even see that money. To resist the temptation to spend it, keep a savings account without an ATM card so it’s not easy to access. You’ll be amazed how it adds up!
- Using payday loans, check cashing, and rip-off credit accounts
Remember how we just mentioned financial emergencies? When the roof leaks, someone gets sick, or the job starts laying people off, those cash crunches often result in people making panicked, short-term financial decisions just to get by. Frequently, those result in cash advances on credit cards, payday loans, using check cashing establishments, applying for a bunch of new credit cards at once, or looking for other personal loans.
The terms and interest rates on these loans can range from incredibly high and expensive all the way to usurious and illegal, and usually put people in a much worse financial situation than when they started.
- Making impulse purchases
Have you ever noticed that retail, department, and grocery stores line the checkout aisles with certain items? They do that on purpose, of course, because they understand that the majority of consumers will make impulse purchases; buying things they don’t need and didn’t plan on purchasing.
Just how much can you save by skipping the magazines, sodas, electronic knick-knacks, and other impulse purchases every month? Furthermore, do you even know how much you’re spending on coffee, lunches, and meals out? It all adds up.
Try this: For one month, carry around a little notepad (or just use your smart phone – there are great apps that help you track every dollar you spend), and write it down every time you spend a dollar. At the end of each week, add it all up according to categories. You’ll probably be shocked how much you’re spending on things you don’t need or necessarily even want – and that money could be going to savings, paying down your credit cards, or other good use.
- Not checking your credit periodically
Did you know that only 1 in 4 people check their credit report annually, and 60% of Americans don’t even know what their credit score is now? Checking your credit report regularly is so important for a host of reasons:
- 25% of credit reports contain errors, inaccurate or duplicate information.
- ID theft and credit fraud now affects nearly 10% of the population every year, and the recent Equifax Hack saw the personal data of about 167 million Americans compromised.
- These days, your credit score is so more important than just getting a mortgage or applying for a new credit card. Getting an apartment, the insurance rates you pay, your utility and cell phone accounts, and even getting a new job may depend on a clean credit report and a good score.
- Not looking into refinancing your mortgage
If you do own your home already, congratulations! While it may be the best investment you’ll ever make, there’s no denying that you’ll be paying it off for a long time (usually 30 years) and for a huge sum of interest – probably more than the original home price! So every smart homeowner should inquire with their mortgage broker if a refinance is available and something that would help them save.
It’s free to talk to your favorite loan officer and get an idea about your options, and lower-interest mortgages or refinancing into a product like a 15-year loan may save you tens (or even hundreds) of thousands of dollars over the years. You may even be able to save money on your monthly payment AND pay the home off faster, but the worst that can happen is that they tell you that you don’t need to make a change.
By the way, the better your credit score, the lower your interest rates and payments will typically be!
- Not reading the fine print
That 0% credit card offer sure looks great, but what will the rate be after that introductory period? Is that great low mortgage payment fixed, or will it go up as other interest rates rise? What are the fees and charges associated with that new student loan or business loan?
Too often, we’re offered new credit that looks like a no-brainer, but comes with some important stipulations that will make it way more expensive in the future.
Nothing is free in this world (except great credit advice from Nationwide Credit Clearing!), so make sure to read the fine print and know exactly what you’re getting into before you sign on the dotted line. Any loan, investment, or other financial vehicle is sure to come with fees, charges, and interest rate details that are crucial to understand. Read all you can but it’s also a good idea to ask questions – and get the answers in writing!
Look for part two of this blog soon, where we’ll cover the next eight things to stop doing if you don’t want to be broke!
What do couples fight about? Money, finances, and even credit lead the list – but it doesn’t have to be that way.
Likewise, people in longterm relationships or even just dating often have ups and downs, bumps in the road, and even fights.
But did you know that the number one cause of arguments and disagreements among couples?
You might be surprised that it has more to do with spending, savings, and even use of credit than more romantic concerns.
According to research, here are the top 5 things couples fight about:
2. Division of domestic responsibilities
5. Power dynamics
It turns out that the number one cause of relationship disagreements, squabbles, and wars of the roses is money.
What specific money issues count as a relationship red flag?
Here are the most common financial issues or topics we couples fight about:
• The cost of raising children
• Taking care of aging parents or family
• One person makes more than the other
• Risk tolerance
• Financial objectives
• Personalities and values
• Power dynamics in the relationship
• Previous debt or debt accrued during the relationship
So why is money such a hot button issue, to the point that it breaks up so many seemingly happy relationships?
For most people, money is one of the most stressful and emotional problems. In fact, data from the American Psychological Association reveals that money is the leading cause of stress for Americans today.
Our attitudes, background, and values about work, money, security, and retirement are passed down from our parents starting at an early age, and so they are deeply ingrained, right or wrong.
In fact, many people won’t jump into marriage – or even start dating someone – if they don’t feel they are financially compatible. A recent national survey found that 57% of men and 75% of women say that the other person’s credit score factors into their decision to date them or not. And about 30% of women and 20% of men say they won’t marry a person with a low credit score!
The truth is that arguments over money compound, more than any other reason, except perhaps infidelity, and this type of fight is the most likely signal that the relationship is ending. In fact, studies have shown that fighting over money is a leading indicator of rocky relationship roads in the future. In fact, only substance abuse problems and cheating are bigger predictors of divorce than money issues!
These days, the average couple getting married has a 40-50% chance of getting divorced at some point. But couples with no significant assets at the time of their marriage are 70% more likely to get divorced than couples that are solid financially. In fact, if your income is at least the U.S. median (about $50,000), your risk of divorce is decreased by 30% (compared to those who make $25,000 or less).
It’s no wonder why money plays such a critical role in our relationships, as “financial infidelity” is also on the rise, a form of dishonesty when partners hide their financial dealings from their better half – or even lie about them.
However, if you feel that your spouse spends money irresponsibly, your likelihood of divorce is increased by 45%. Researchers also found that newly married couples who took on a lot of credit card debt became less happy over time. But newlyweds who cut back, saved, and paid off or stayed out of debt measured higher levels of happiness over their marriages.
But before you start second guessing your current relationship because you have disagreements about money from time to time, note that relationship experts and marriage counselors say almost all couples have these heated exchanges over dollars and cents.
“People should expect to fight about finances,” says Laurie Puhn, a New York City-based couples mediator. “It’s a part of any marriage and any long-term relationship. You will fight about finances.”
What’s a “normal” amount of fighting over finances? About 31% of all couples — even the ones that say they are very happy – have at least one fight over finances and money once a month or more.
Look for part two of this blog where we cover tips and tactics to help ensure that money doesn’t ruin your relationship!
6 Financial Mistakes Young People Make
Whether you just graduated from college or are moving out on your own, it can be hard to keep track of your personal finances as a young adult. Read through these 6 common financial mistakes and learn how you can avoid them.
1. Not Taking Advantage of Discounts: There is a world of special prices for students and young people out there, from banks to movie theatres – take advantage of them! Do your research beforehand, find out what discounts are available to you. Check out Groupon or Retail Me Not.
2. Misunderstanding Credit Cards: Whether it be cash advances, large balances, late fees, or only playing the minimum balance, credit cards can lead to much more trouble than realized. The fine print and details of credit cards are often times misunderstood by young people. Read into what you are signing up for and ask plenty for questions when you do not understand something.
3. Signing Up For A Rental Or Mortgage That Is Too Expensive: Signing a lease for rent or applying for a mortgage that leaves you with little money to do anything else, will not only leave you at home but put you at risk for debt. You have no cash at hand, so what do you do? Sign up for credit cards to make up the difference in order to enjoy your lifestyle and pay for unexpected costs. Avoid making this mistake, sign up for a lease or mortgage that is within your budget in order to avoid creating debt for yourself.
4. No Rainy Day Fund: Setting aside money for emergencies gives you cushion for unexpected events and helps you avoid adding to your credit card balance. Maybe your car got towed, or you get injured, having a “rainy day” fund keeps you prepared for the most unexpected events. Including a “rainy day” fund as a part of your budget, will eventually help the money add up.
5. Failure To Realize How “Little Things” Add Up: Your daily coffee stops, eating lunch out, or weekly shopping trip of $100, can all add up to thousands of dollars a year. Cutting back can help you save a lot of money for savings, retirement or paying down your debt.
6. No Financial Planning Or Budget: Some young people are tainted by the idea that saving for the future is only for people thinking about retirement. Everyone can benefit from financial saving whether you are planning for retirement, purchasing a home, or traveling around the world. It is also important to budget your daily expenses. Sit down and look at what is left after your wages and fixed expenses. Not knowing how much you have can easily lead to spending more than you can afford. A budget will help you determine what you need to do to pay for your next vacation.
Nationwide Credit Clearing
2336 N. Damen
Chicago, IL 60647
Toll Free: 877-334-3296
Can’t get a loan because of low credit score?
If you have a low credit score or credit problems as a result of declaring bankruptcy or foreclosing on a home, or if your credit scores have dropped because of late payments or failure to pay, do not despair.
Although a good credit score can drop very quickly, at times taking a hit of as much as 150 points or more, it is possible to improve your credit over time and to qualify for a new mortgage loan. Boosting low credit scores is not the only means for people with deficient credit to get a home loan. The Federal Housing Administration (FHA), in an effort to promote homeownership, has made it easier for people with a damaged credit history to qualify for a mortgage loan. Under certain circumstances, people who have foreclosed or declared bankruptcy can obtain an FHA loan several years earlier than a conventional loan, and these people can buy a home with a smaller down payment.
Credit Scores & Lenders
Credit scores indicate to lenders how well you manage money. You can improve bad credit by demonstrating that you can now handle money more responsibly. Furthermore, since poor credit scores translate into high interest rates on home loans, an improved score will help you get lower interest rates when you are ready to qualify.
How to improve credit scores to qualify for a loan
Here are a few ways people with a negative credit history can raise their credit scores and ultimately obtain financing for a new mortgage loan:
- Improve payment history by making payments on time
- Do not open new lines of credit Use credit cards sparingly, and without overextending credit lines
- Make payments in full Have up to four different kinds of credit accounts
- Show evidence of steady employment for a period of one to two years
- Come up with a budget plan and stick to it
- Build up savings
Insider’s tip: Credit experts advise not spending more than 25 percent of your available credit on any credit card account. If you have a $1,000 maximum in a given account, the balance should not be more than $250-$300. Better yet, wipe the slate clean and carry no balance whatsoever.
Other options to consider
Credit Repair? Nationwide Credit Clearing can help you eliminate any incorrect or negative items on your report, ultimately allowing you to qualify for that home loan.
Give us a call today.
Nationwide Credit Clearing
2336 N. Damen
Chicago, IL 60647
Toll Free: 877-334-3296
What is Considered a Good Credit Score?
Do you know what is a good credit score?
Still have questions?
Call the experts at Nationwide Credit Clearing
Nationwide Credit Clearing
2336 N. Damen
Chicago, IL 60647