This week we will discuss 5 Bad Habits That Could Be Costing You Money.

Over the past few weeks we have discussed the three “C’s” that are essential for your path to financial freedom and wellness: Communication, Commitment and Change.  Effectively communicating with your creditors and making a commitment to yourself are steps in the right direction to initiate change.  What you want to avoid is sabotaging positive change by practicing bad financial habits such as continuing to make late payments; make every effort to pay your creditors on time.

Good credit scores enables you to save money, increase your buying power, receive the best interest rates from your financial institutions, get better quotes from your insurance provider and provides information to the utility companies on your ability to repay.   A consistent late payment history will cause lenders and insurance companies to view you as risky; therefore you will pay more $$ in higher interest rates and premiums.  On time payments = lower interest rates and lower premiums; which means that you will more than likely save $$.  Good credit scores = A clean bill of financial health.   All of the areas mentioned above could be costly if you are operating with a history of bad habits.

There are some things that you should know about “Late payments”.  According to Detweiler, 2013 of

  • 30 days late– This record will damage your credit scores most when it is recent. The exception is if you are 30 days late often. Otherwise, a single 30-day late payment should not cause lasting damage.
  • 60 days late– Similarly, recent 60 day late payments cause the most damage. Again, the exception is if you are 60 days late often which will certainly hurt your scores. Otherwise, one late payment should not cause long term damage.
  • 90 days late– This record will damage your credit scores significantly for up to 7 years. It doesn’t make a difference whether or not your account is currently 90 days late. Remember, the goal of the scoring model is to predict whether or not you will pay 90 days late or later on any credit obligation. By showing that you have already done so means that you are more likely to do it again compared to someone who has never been 90 days late. As such, your credit scores will drop.
  • 120+ days late– Late payment reporting beyond the initial 90 day missed payment does not cause additional credit score damage directly. However, there is an indirect impact to your scores. At this point, your debt is usually “charged off” or sold to a 3rd party collection agency. Both of these occurrences are reported on your credit files and will lower your credit scores further.

Make every effort to exchange your bad habits for good ones.  Paying your debts on time makes up for 35% of your credit score.  Therefore, get serious about making payment arrangements that you can keep and watch your credit score soar.  There are other factors that play a role in increasing your credit score and we will discuss those areas this week.  Happy paying on time!!

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