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Many consumers are finding it difficult to pay their bills.
To date, 37% of Americans have been charged a late fee on some kind of bill in the past 12 months. according to New report from NerdWallet.
Credit card late fees are the most common, with 21% of respondents incurring at least one. Others were charged a 10% late fee on utility bills and 8% on rent. NerdWallet polled 2,061 U.S. adults in early April.
“Late fees are just one of the consequences of late payments,” says Sara Rathner, travel and credit card expert at NerdWallet.
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While you may be charged a late fee once you miss a payment deadline on a credit card or loan, it usually won’t show up as a blemish on your credit report until you’re 30 days past due, says Matt Schulz .
Experts say the situation becomes more serious if you’re 30 days or more late. Missing payments can also have more serious consequences, such as shutting off utility services. Some consequences may also be immediate, e.g. car repossession.
“If you know you’re going through a tough financial time, it’s better to address it head on rather than wait,” Schultz says.
Here’s how to limit the impact of late fees and work with your creditors when certain life events, such as a layoff or financial hardship, impact your ability to pay.
“Talk directly to creditors”
Bankrate.com financial analyst Greg McBride says if you start falling behind on your usual monthly payments, or anticipate you might fall behind, it’s best to “talk to your creditor directly before you run into trouble.”
“That’s when you have the most options. The further behind you are, the fewer options there are,” he said.
It helps to communicate your concerns early on. If your bill is due on the last day of the month, don’t wait until the day before to contact your servicer, Schultz said.
If you contact them ahead of time, he says, you have more flexibility to explain your situation and negotiate a solution.
“Anytime you can step into one of those situations and offer a solution … it goes a long way toward making the conversation go more smoothly,” Schultz said.
1. Request to waive late payment fees
Cardholders can ask their card issuer to waive late fees the first time they miss a payment, Schultz writes in his book, “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life.”
But keep in mind, “the more times this happens, the less likely the lender will offer a waiver,” McBride says.
If you’ve been late on a payment in the past and are likely to be late again in the near future because of financial problems, let your lender know, Schultz says.
“It’s one thing to go to your lender every other month and say, ‘Hey, I’m late, can you waive it?’ It’s another thing entirely to say, ‘Hey, I’m late because I have a medical emergency. , or I’m unemployed,'” he said.
2. Participate in hardship programs
If you realize that your payments are becoming more difficult due to an unexpected life event such as a layoff, most lenders offer hardship programs. Schultz writes in his book that these could help consumers by temporarily lowering interest rates and waiving fees.
McBride explained that while the specifics may vary, “the key is to seize” these opportunities because they are “designed to help you get back on your feet.”
“If you run away from problems and end up falling further and further behind, it only further limits your options,” he said.
3. Ask how to clean up your credit report
Even one late payment can seriously impact your credit score; it may fall Your score can improve by up to 100 points, depending on other elements of your credit history.
Experts say if you made a one-time mistake, you can contact your lender and ask that the late payment be removed from your credit report. While this is possible in some cases, lenders generally dislike this strategy because it makes the data unreliable for future credit transactions.
“Your credit report is just a collection of data points that represent how well you’re paying down your debt,” Schultz says. If lenders start cherry-picking what’s in your report, the data becomes unreliable. and does not help lenders make decisions.
“The primary customer for credit reports is not consumers, but businesses,” Schultz said. The reports are designed to help businesses make lending decisions.
Although this rarely happens, if you are in an unusual situation and have a “spotless history,” you can go to the lender and explain what happened. For example: If you’re late on a payment because of a natural disaster, it never hurts to ask.
“Everyone encounters strange life situations,” he said.
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