Credit Card Payments & Your Credit Score

The differences between a late credit card payment and a missed payment.

Late credit card payments and missed credit card payments sound similar, but they are different in many ways. In the end, neither is a good option. However, one has more dire consequences than the other. Let’s discuss them.

Late Payments

A late credit card payment is a payment made after the due date but before the end of a billing cycle.

Here’s an example. Let’s say your credit card is due on the 20th of every month. One month, you forget to pay by the 20th, but remember before the end of the cycle (usually 30 days). That payment would be classified as a late payment. There can be some wiggle room with late payments. Some lenders give a grace period of a couple of days. However, even with a grace period, you can expect to pay a late fee. But a late payment typically won’t hurt your credit score.

Missed Payments

A missed credit card payment happens when you don’t make any payment during the billing cycle. If you miss a payment, you’ll pay a late fee, and your credit score will likely take a hit. Even worse, a single missed payment can stay on your credit report for up to seven years.

Help Yourself

As you can see, missed payments are worse than late payments. The bottom line? Pay what you can, as soon as you can. The longer a missed payment goes, the more it will hurt your credit score.

Credit Pulls: Hard vs. Soft Inquiries

Knowing how hard and soft inquiries affect your credit is a big part of being financially healthy. When you apply for credit or a loan a creditor will “pull” your credit. This check is called a hard inquiry – but there are also soft inquiries, too. Here is what makes them different:

Hard Inquiries…

·         Are used after you apply for credit to determine whether or not you will get it.

·         Will show up on your credit report and will typically remain there for two years.

·         Are commonly used for applications for mortgages, auto loans, credit cards, student loans, personal loans, and apartment rentals.

·         Require your consent in order for companies to pull your report.

·         Can lower your score, especially if you have too many pulls in a short amount of time (though pulls in a two week period for the same type of loan – like a mortgage – are viewed as a single one)

Soft Inquiries…

·         Are commonly used for employment verification, to preapprove you for offers, insurance quotes or when you are checking on your score and report.

·         Show companies exactly what you would see if you were to pull your own credit report from Experian, Equifax, or TransUnion.

·         Are accessible by companies without your permission – but don’t worry, it doesn’t affect your credit in any way.

·         Won’t negatively affect your credit score and won’t appear on your credit report.

Checking Your Credit Reports

When you check your report, you can:

·         Find — and correct — errors. Removing errors will then boost your score.

·         Detect identity theft attempts (and sometimes evidence of actual identity theft.)

·         Implement security measures in place to put a stop to theft.

Contact the Bureaus

There are three major credit bureaus — TransUnion, Equifax, and Experian. You have a report with each of them, so you need to check all three. That might sound complicated, but you don’t have to contact each bureau for your reports. Instead, there is one website, one phone number, or one mailing address for all three. You can get your reports via any of them.

·         Website: Annualcreditreport.com

·         Phone: 1-877-322-8228

·         Mail: If you want a copy of your report mailed to you, you must first fill out this report request, and then mail it to:

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

Do One Thing: Make checking your credit report a part of your financial life. Set a reminder to check it at least once every three to four months.

How Paying Monthly Credit Card Balances Affect Your Credit

Why Pay Off Monthly Balances

There are some specific reasons to stick with this proven approach. When you pay off your balances monthly:

·         You won’t get stuck paying interest on purchases, which saves you money.

·         Your credit utilization should remain low, which improves your credit score.

·         A higher credit score means potentially better rates on loans, which can translate into saving thousands of dollars over the life of a loan.

·         You’ll likely sleep better at night without the crushing weight of debt hanging over you.

Can’t pay off your balances every month? Do one thing: If you aren’t able to pay off your credit card balances in full every month, don’t panic. The key is to pay as much as you can, above the minimum payment, if possible, to chip away at your debt consistently. With inflation still pushing up the price of nearly everything – and millions of people living paycheck-to-paycheck – not everyone will be able to pay all of their credit card balances every month. And that’s OK.

·         Pay as much as you can. The key is to pay as much as you can against the balance – and more than the minimum payment. Only paying the minimum balance, which is often 2% of the total, can stretch your payments across multiple years. That means if you pay for a nice dinner out with your credit card and then only make the minimum payment, you could be paying for that meal for months.

·         Tackle higher interest rate cards first. If you owe money on more than one credit card, it’s important to pay more against the balance of the one with the highest interest rate first. Continue paying the minimum on the other cards, too. Once you have paid off the card with the highest rate, tackle the account with the next highest rate. Keep doing this until all of your high-interest credit card debt is paid off.

·         Look for promotional offers. Another way to pay off credit cards more quickly is by moving some of your debt to a card with a zero or low-interest introductory rate. If you get mail or email from credit card issuers that say you are pre-approved (or preselected) for a new card with a better rate, look into the offer.

·         Consider a side hustle. If you have the time and energy, look into picking up side work to help knock down your debt even faster. There are literally dozens of online options for jobs that you can do from home. To see what’s out there, go to the app store on your smartphone. Type in the keywords ‘make more money’ then scroll through the results. Once you find something that suits you, do some digging by going online to see what others are saying about the company.

Originally written by SavvyMoney.