No one likes to be chased by creditors. There are times in life when you may be short of money. Certainly, during the recession, there were many people who faced significant debts when they lost their jobs. Many have not recovered and their credit scores reflect that although blemishes only remain in a credit history for seven years. Most people have been able to find employment once again with the national unemployment rate back down around 5%. However, that does not mean that everything in American society is fine. There is still significant debt in many households; the average credit card balance debt suggests that families are well into five figures.
If you are struggling to meet all your financial commitments you need to give the situation serious thought because debt does not disappear by magic. You need to understand how to address the problems you face and at times, that means settling the most important bills first.
There are penalties for late payment of some bills while others may not be a problem for a little time. If you fully understand the way your credit score is calculated, you should recognize when you will receive a negative entry on your credit history and where you have a little leeway. That is a factor in your deciding which bills to place at the top of your creditors’ list. Decide for yourself the order!
1. Your Automobile
Lenders cannot report you until you are 30 days late with your auto loan payments. However, the consequences of passing 30 days are likely to be a 100 point drop in your credit score, and ultimately losing your automobile. Such a drop in your score will certainly harm your chances of any future credit and of course that means you may not be able to obtain a cheap used car once you lose your current one. One thing you should be aware of is that in some States of the USA, realistic loans lenders can repossess your vehicle as soon as you miss a payment. It means that your auto loan is possible top of your list of priorities.
Everyone needs to maintain their utilities. They will never be turned off overnight but likewise the bills will never be written off. If you keep your suppliers informed if you have a problem, you may be able to negotiate to have bills deferred or rescheduled. If you simply ignore the problem, you will be heading for trouble and your defaulting will certainly put blemishes on your credit history.
If you have been a reliable tenant and your landlord is holding a deposit, you should be secure in the short term if you get into trouble. It is essential that you talk to your landlord because the law allows a landlord to get an eviction order as soon as you are a day late. Realistically, landlords lose money whenever their properties are empty so they will factor that in when making decisions on how to treat you if you are late in your payment.
In order to get a mortgage in the first place, you will probably have to have a good credit score. If you fall seriously behind with your payments then you could face the prospect of losing your home and the damage to your credit score is likely to prevent your getting another mortgage at least in the medium term.
You are unlikely to be reported if you are a little late with a payment, especially if you make the effort to talk to your lender, explain the situation and stick to the promise you make to pay by a specific date. In practice, you can be two or three weeks late but you must try to avoid getting a month behind at all costs.
In terms of foreclosure, it is unlikely that any lender will start proceedings unless you are at least three months behind, often more. It is a costly exercise that lenders want to avoid if at all possible.
Use your common sense and keep the lines of communication with your lender open if you get into real difficulty.
5. Student Loans
One debt that is perhaps the easiest to reschedule is a federal student loan. There are actually circumstances under which they are written off but that should not be a tactic that you use. If you qualify for a deferrment, then that should not harm your credit standing. It will be more difficult dealing with private lenders but you should continue to talk to them in an effort to find a solution.
6. Credit Cards
Credit card companies make their money from the interest they charge on balances outstanding at the end of the month once clients make their monthly payment. As suggested above, many people are carrying significant balances that cost them a high rate of interest. As long as you make a minimum payment each month, you will not be pursued by a card company but you will be building up problems for the future if that is all you do.
If you are late with a payment there will be a penalty and if you creep up towards your credit limit, your problems may only just be starting.