Do you have late payments?
This is an important question that Canadians should ask themselves from time to time. Late payments are simply pre-arranged payments that are made past their due dates according to the loan rules. These rules are stated during a loan application and are considered accepted when the person receives a loan. Credit cards, mortgages and car loans all have stipulations which outline what happens when a payment is late.
Generally payments are due within 30 days of receiving an invoice. Take a look at your phone bills, credit cards, cable, and utility bills. They all identify a due date. If payments are made after this date, you can run into some serious financial problems.
Late Payments are Expensive
Paying your bills late can cost a lot of money. Sometimes, you will be charged an administrative fee which could be $10, $20 or more. Interest rates can change on credit cards if you make late payments. From a promised rate of 10%, a late payment will give reason for your credit card company to charge 29% or more. See Interest Act of Canada for details on what companies can charge.
Why does it matter if I have past due payments?
Lenders and companies offering services where payment is made on a monthly basis will be specifically interested in your credit history related to late payments. You’ll often run into credit checks when you sign up for a new cell phone plan, putting in a rental application or applying for a mortgage. What these companies want to know is if they can recover their money on time. If you have multiple late payments on various accounts, chances are you will be denied for a loan, or will require a hefty deposit.
When payments in arrears, they are reported on your credit profile and in turn affect your credit rating. Payments are categorized as 30, 60, 90 or 120 days late. The longer the payment is past due, the bigger impact it has on your credit score.
Paying on Time Pays off
Even though you may have a low credit score, have gone through bankruptcy or debt counselling, showing that you pay your bills on time will definitely make it easier to be approved. Companies may overlook your credit score if you can show that you make your bill payments on time over a period of 2 years or more. Making regular payments, on time, will have a bigger influence on lending decisions than a low credit score. It shows to the lender than you are on your way to improving your financials and that you can be trusted in paying back your loans.
Do you have late payments? If you are not sure, check your credit report.
