You may be aware of the consequences of missing a bill payment or suffering a long-term delinquency on one of your credit accounts. Not only will you endure a negative mark on your credit reports, but your good credit score* will likely fall, as well.
Falling behind on your credit payments can lead to problems with your credit report and score, but so can poor management of smaller expenses, such as parking tickets and utility bills.
While these fines and monthly balances may seem small compared to a mortgage or auto loan payment, failure to responsibly handle these bills may result in them being sent off to collections — an action that will affect your credit scores.
No Fine Is Too Small to Be Neglected
Whether it's a speeding ticket, a fine for a parking violation or a $22 electric bill, you should make every effort to pay off these amounts. Although many companies may have let small balances slide in the past, with the economy continuing to struggle, fewer local governments or businesses may be as willing to turn a blind eye. Rather than just cancel your electricity bill, a utility company may also send your debt to a collections agency. As a result, you may now see damage to your credit reports and scores in addition to an outstanding debt.
Handling Overdraft Charges Responsibly
Many consumers tie their monthly bills to a debit card, allowing their cable television or wireless service provider to automatically deduct funds each month to cover the cost of the services. However, in some cases, you may not realize that your bank account balance is too low to cover the charge. As a result, you receive an overdraft fee. Although an overdraft will not immediately have an impact on your credit reports and scores, that may change if your bank decides to send the amount to collections. To prevent this from happening, check their bank account balances regularly, but especially before a designated automatic bill payment. Also, you may want to connect another type of an account — savings or money market — to your checking account, allowing you to use additional funds to automatically cover an overdraft.
So, when you're sitting down to pay your mortgage or car loan bill, avoid brushing a parking ticket off to the side. Instead, figure out a plan to pay off the amount quickly and responsibly. Doing so may help you better manage your finances.
- Start monitoring your credit now to help you stay alert to changes.
- Why you should get to know your credit better.