Late payments can have a significant impact on your credit score, making it difficult to qualify for credit and receive favorable interest rates in the future. Even one 30-day late payment can significantly hurt your credit score, since your payment history is the most influential factor in calculating your score.
A little planning and strategizing can go a long way to help you avoid late payments on your credit report.
Adjust your budget
Having a detailed budget that tracks your monthly spending can help you take stock of your income and bill obligations. Make sure your budget lists what bills you need to pay, how much you owe and when payments are due. If there’s little or no room in your budget after paying your bills, you may want to reduce your spending or find ways to earn more income to ensure you have enough to make all your payments on time.
Set up autopay
Enrolling in autopay is one of the easiest ways to prevent a late payment. When life gets busy, rest easy knowing that your payments are scheduled to go through on time. You’ll just need to make sure you have the funds in your account to cover each transaction.
Set alerts and reminders
Having due dates included in your budget can help you stay on top of bills, but reminders can help make sure you never forget to pay a bill. Nearly all banks and budgeting apps allow you to set up alerts and reminders of upcoming bill deadlines. It’s a good idea to schedule reminders a few days before bills are due to give yourself time to review them and verify you have the funds to cover them.
Build a flexible payment schedule
Making some adjustments to your due dates and payment schedules can make it easier to make payments on time. For example, you might want to schedule bill payments a few days after payday. This way, you can take care of your bills before funds are used elsewhere.
Some creditors allow you to pick your own due date, which could help you spread out payments over the month and make it easier to manage your budget. Alternatively, if you get paid only once a month, consider arranging all your due dates to fall shortly after payday.
Review your finances regularly
It’s difficult to know where you are financially—and whether you’ll be able to pay your bills each month—if you don’t know how much money you have on hand.
Set aside time at least once a week to review your financial position, including upcoming payments, balances in your accounts, discretionary spending and more. Regular financial reviews will help you see potential red flags before they become a bigger issue. This allows you to move money from one account to another, quickly make some extra cash or reach out to your creditor and make alternative arrangements before you risk a payment being late.
For more information on budgeting and understanding credit, see the following articles: