The Importance Of On-Time Payments

Robert Palumbo

Oct 18, 2018

You may have heard that making on-time payments is the key to having a good . But just how important is it to make your payments on time?

The importance of on-time payments

Making payments on time, also known as your “payment history”, makes up 35% of your credit score – the most of any other category. Late payments are assessed based on three measures:

  • How recent the payments are
  • How severe they are
  • How frequently you’re late on payments

The typical timeline goes as follows: 30 days, 60 days, 90 days, 120 days, 150 days, and then it will be written off as a loss and categorized as “uncollectible.” It’s extremely important to keep up with payments or be aware that you’re late, as even one late payment can affect your credit score. In addition to negatively impacting your credit score, chronic missed payments may lead to higher interest rates, late fees and penalties, reduced credit limits, and even court judgments.

What can you do to make sure your payments are on time?

There are a couple of simple steps you can take to make sure that you aren’t late on payments:

1. Set up automatic payment reminders

This can be done with a mobile app, online banking, or even built-in reminder notifications on your phone. Whatever you choose to use, you can ensure that you’re always aware when your bills are due.

2. Make a written budget to keep track of bills to pay off

Write down all of your current loan amounts and credit cards balances. Remember to include the interest rate on each of your different forms of debt.

Make sure to write down the monthly payments, including interest, that is required to pay off the debts. You should prioritize paying off the higher interest debts first. If you find yourself paying a very high-interest rate on your debt, it may be a good idea to move this debt over to an account with a , if possible.

For example, if you have a credit card with a 19.99% interest rate and you’re late on payments, it may be in your best interest to pay off this debt with a . Then, you can pay off debt quicker. thanks to lower interest payments. 

We hope we answered your questions about the importance of on-time payments. We’re happy to answer any other credit-related questions you have. We’d love to hear from you, so tweet us !

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