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The Resource Center Credit Fraud & Credit Monitoring | article

What You Should Know About Automatic Billpay

Most financial institutions, lenders and organizations now allow consumers to arrange for automatic billpay. This option generally expedites bill payments by automatically withdrawing the owed amount from a consumer’s checking account, saving them time and helping them avoid a late payment which could ultimately affect their credit score. At the same time, there are a few risks to automatic billpay, so it’s important for consumers to know what they’re getting into ahead of time.

How do late payments affect credit scores?
The most popular benefit to automatic bill payments is that it helps cut down on late payments, freeing consumers from worry that their good credit score will take a hit if they forget to pay a bill. It’s a legitimate concern — late payments can take their toll on credit scores. It depends on the creditor, but some banks or debtors might be quicker to report a late payment to the credit bureaus if they’ve noticed a pattern of tardiness. If a borrower has a solid history of repayment, creditors may be willing to let one late payment slide. But a credit score could still be negatively affected if a payment is more than 30 days late.

Ways to manage automatic billpay
Avoiding a hit to their credit reports and scores may be enough for many consumers to enroll in automatic billpay, but there are still risks even after they’ve taken that action. Below are a few ways to avoid falling into auto billpay peril.

  • Receive payment reminders  — Some consumers set up billpay and then forget about that debt entirely, making it difficult to form a proper budget and putting their credit reports and scores at risk. Arranging to receive payment reminders in the mail or via email can ensure that you stay on top of your debt.
  • Stick to a budget plan — Consumers should consider an organized way to track their payments. Developing a schedule and then checking off when a bill is paid can help keep you up-to-date on your debt.
  • Resolve errors quickly — At times, a glitch or human error may result in a bill being paid twice or not at all. Consumers are advised to contact a debtor as soon as possible to resolve such issues. You should also write down the name of the service representative you speak to about it and follow up soon after your conversation to ensure everything is being resolved.

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