Failing to pay a monthly bill on time can have major consequences. Some companies will slap you with late fees, higher interest rates, and other penalties when you miss a due date. If you neglect a bill for too long, it could show up as a late payment on your credit report and hurt your credit score. And if you never pay, debt collectors or court judgments could be in your future.
Most of these scenarios can be avoided if you act quickly. Here’s what you should do if you missed a monthly bill payment.
Pick Up the Phone
Whether it’s a credit card, utility, or loan, the best way to deal with a missed payment is to call the company once you realize your error. The sooner you pick up the phone, the sooner you can make things right, and you may even be able to avoid penalties or damage to your credit score.
You should contact the company, take responsibility for your mistake, and express your willingness to pay. From there, you can work out a solution.
“Missing a monthly payment is never a good idea because it can reflect poorly on your credit report, lower your credit score and even cost you money in fees and penalties. When you do miss a payment or know that you’re going to miss one, call your lender,” said Natasha Rachel Smith, personal finance expert at TopCashback.com.
Make the Payment …
If you have the money, you should pay your late bill immediately. Once they’re 30 days late, missed payments can start affecting your credit. The damage to your credit further increases as a late payment his the 60-day and 90-day past due mark. At 120 days, they could be charged off or sold to a debt collector, which will lower your credit scores even more.
In short, paying your bill now can eliminate or minimize further damage to your credit.
… Or Work Out an Alternative
If you can’t afford the payment now, you may be able to negotiate an alternative solution like a payment plan or extension. Many lenders and service providers would rather negotiate a solution than walk away with nothing.
“Often lenders are willing to negotiate with you if you’re upfront about your financial situation,” said Smith. “Remember to evaluate your finances prior to calling so you can have a good idea of when your finances will be in order or when you’ll be able to continue your monthly payments.”
Ask for Waived Penalties
Some companies impose late fees for missed payments, and certain credit card providers may raise your interest rates. Unpaid auto loans could even result in your car getting repossessed. But if you call, explain your situation, and offer to pay the bill, you may be able to avoid certain penalties. If you’re a longtime customer in good standing, you have some leverage for negotiation.
“Use your loyalty as leverage,” said Lisa Rowan, writer and personal finance expert at The Penny Hoarder. “They may be open [to] waiving your late fee or [accepting] a payment by phone.”
Set Up Automatic Payments
After a late payment scare, you should consider setting up automated payments that trigger from your bank account on payday. This will help you avoid missing future due dates.
“The best way to prevent missed payments is to automate your payments. Once you get your direct deposit, set it up so your credit card is paid on a certain day of the month followed by other utilities, rent, internet, and more,” said Rowan.
Check Your Credit Report
Even if you eventually paid your bill, a late payment over 30 days can land on your credit report and damage your credit score, so you should check your credit report to see if it’s there. While there may not be much you can do about legitimate late payments, inaccurate negative information can be disputed and removed from your credit report.
You can check your credit report for free once a year at AnnualCreditReport.com. You can also track your credit more regularly. Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.