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Can you pay late without damaging your credit?

By Gina Pogol
Mortgage Credit Problems Columnist


Dear Gina, I'm in a financial bind right now and expect things to be pretty tight for the next six months or so. So, I'll probably have to juggle some bills. I know mortgage bad credit is the worst, but are there other bills I can be late on without doing too much damage to my credit score? - Fran, Meyers, Calif.

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Dear Fran,

You're right. Some bills affect your credit more than others. Here's a quick run-down of different kinds of payments and how being late affects your score.

  1. Medical bills: Medical expenses commonly end up on collections for reasons that are not the fault of the patient. Insurance companies may pay late, there can be mix-ups about the charges, and medical procedures may be necessary even if they haven't been budgeted for. Because of this, doctors, hospitals and other providers don't report to credit bureaus. If eventually the payment goes to a collection agency, credit bureaus don't include medical collections of $100 or less in your score. But watch out! If the same collection agency gets several small accounts totalling more than $100, they may combine them -- and then it does affect your credit score.
  2. Utilities: As a rule, utility companies don't report late payments. In many states, it's illegal for them to report to credit bureaus. However, overdue balances that get sent to collection agencies do get reported and cause your credit scores to drop.
  3. Credit cards, car payments, mortgages and other obligations: If you're 15 or more days late, expect to be hit with charges and perhaps interest rate increases. However, the credit bureaus don't consider your payment late unless it's at least 30 days overdue. In addition, if you've had an account for many years and boast a perfect or near-perfect payment history with the creditor, you may be able to persuade the company to "re-age" your account and not report a late payment. Of course, you'll need to be able to pay what's owed immediately if your request is granted.
  4. Rent: Standard credit reporting by Experian, TransUnion and Equifax does not incorporate rental history. So being late with the rent won't ordinarily affect your credit score unless long-overdue balances get sent to collections. Keep in mind, however, that if you apply for a mortgage and you currently rent, the mortgage lenders will request a rating from your landlord.
  5. Your bank account: If you bounce checks, it doesn't ordinarily show up on your credit report. However, there is ChexSystems, which collects data about your checking account usage. Negative history stays on your ChexSystems report for five years. If mortgage lenders see bad credit like bounced checks on your bank statements or ChexSystems report, you'll have a harder time getting approved.
If your obligations exceed your income, you can juggle them successfully to avoid bad credit. Mortgage lenders and other creditors can be worked with to avoid a poor credit history.

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