Credit tip: Big price to pay for a little late

Credit tip: Big price to pay for a little late

Credit score scale

A little late can determine where your credit falls on the scale. Keep it in the green by paying on time.

One of the big ways your credit score is calculated is through Payment History. This section of your credit score is weighted/considered the most, coming in at 35%. As the subject suggests, it focuses on the history of your payments. It is said that if you have a perfect credit score (an 850) a single 30-day late can lower your score by 175 points.

 

That probably doesn’t seem fair does it? Think about it this way; if you were a bank and you had to choose to lend money between one person who had a single 30-day late last month and who, as a result, now has a credit score of 675 versus a different person who went bankrupt 5 years ago who also has a credit score of 675; who would you choose? Hopefully, you choose the aged, bankrupt client because current risk is much more relevant than any other factor that impacts your credit score.Sure, the client who went late might have had a brain glitch, or life event and simply forgot to pay a bill OR they could now be in serious trouble; that doubt is where the real problem lies.

The good or bad news is that no one is really losing quite 175 points, because they didn’t have an 850 to begin with. The total you lose pro-rates depending upon where your score was to begin with. Most people with average credit lose approximately 25 to 45 points due to a late payment.

Either way, even if it is only a $9 late on a credit card with a low balance, don’t pay late. There is a price to pay and that price can affect your mortgage rate, your homeowner’s insurance costs or your ability to qualify for a mortgage for some time to come.

The Mortgage Lady can work with people who have more challenging credit falling in the fair or poor range, but the monthly payments will be affected.  Contact her today to see where you are now and make a plan for improvement.  Contact by phone:  615-969-4350    Email:  lauree@mortgageladyusa.com