Late payments can catch us off guard at the worst times, where making timely payments some months is more challenging than it should be.
Perhaps it’s been a hectic month and a payment just slipped your mind, or due to a financial emergency such as a car breakdown, you find yourself short on funds.
Life happens and it’s not uncommon for an unexpected emergency to cause you to be late on your payments. However, late payments can significantly impact your credit score, making it more difficult to borrow money or secure better interest rates when you do need to borrow.
Having a history of late payments can even make it more challenging to rent a flat or get car finance. Whilst this isn’t always the case, letting agents may check your credit report and flag late payments to a potential landlord.
Thankfully, with some planning and the right strategies, you can reduce the chances of missing a payment due date again.
In this article, we’ll explore some essential tips to help you avoid late payments and maintain a healthier credit score.
1) Adjust Your Budget
An effective way to tackle late payments and avoid late fees is through budgeting. A detailed budget allows you to effectively track your spending, income, and payment obligations.
There’s a reason budgeting features at the top of most of our helpful tips! While it may seem overwhelming at first, it doesn’t have to be. You simply need to be diligent in tracking your expenses and bills to make sure you have enough money to cover your monthly obligations.
In your budget, list payments that you need to make, how much you owe, and when these payments are due. If there’s little to no room in your budget after paying your bills, you may need to look at cutting your spending or looking at debt consolidation to lighten your obligations.
By adjusting your budget, the aim is to bring your monthly spending below your monthly income to ensure you have enough funds left over to make your payments on time.
2) Set Up Automated Payments
With our busy lives, it’s easy to miss a payment here and there, or find yourself struggling to keep organised and on top of your bills. This is where automated payments can help.
When life gets busy, setting up automated payments ensures that your payments are scheduled to go through on time. You simply need to ensure that you have the necessary funds to cover each transaction. Whilst it may sound obvious and many payments are taken automatically, it’s worth reviewing your outgoings and automating any payments you currently have to make manually.
With your payments automated, you can relax knowing that you’ll never be late with rent or fall behind on other essential payments. Just make sure you leave yourself the right amount of money in your account each month.
3) Set Alerts and Reminders
If you find yourself falling short on funds ahead of monthly payments, adding due dates to your budget can help you manage your cash flow better through the month. Paring this with alerts and reminders will also help ensure you never forget to pay a bill.
Most bank and budgeting apps allow you to set up alerts and reminders for upcoming bill deadlines. It’s a good idea to schedule reminders a few days before your bills are due. This gives you enough time to review them and make sure you have the funds to cover them.
4) Prioritise Your Payments
Even with the best budgeting and automations, sometimes being late with payments is inevitable. If you’re struggling to make ends meet and are going to be late with payments, it’s important to tackle it head on and prioritise what you need to pay first, whether that’s rent, debts or essentials.
When it comes to debt repayment, it’s a good idea to pay any credit-impacting bills, like your credit card and loans, before less essential ones, such as subscriptions or luxuries. You’ll also need to focus on urgent and essential bills, like rent and utilities.
Whilst there are protections in place, even bills that don’t affect your credit score can become bigger problems down the line. This happens if the debt is passed to a collection agency, so it’s better to communicate openly with debtors and let them know you’ll be late ahead of time.
It may be worth including this prioritisation in your budget, so if it ever becomes a problem again, you already know what to pay first, and when.
5) Build a Flexible Payment Schedule
Adjusting your payment due dates and schedule can make it easier to pay your bills on time and avoid late payments.
For example, scheduling a payment just after payday allows you to take care of essential bills before your funds are spent elsewhere. This is particularly useful if you find yourself overspending.
Many creditors allow you to pick your own due dates, which can help you spread out your payments to make it easier to manage your budget.
6) Review Your Finances Regularly
It’s more challenging to keep track of your finances when you’re unaware of how much you actually have. Without knowing how much money you’ve got on hand, it’s tough to predict if you’ll be able to cover your bills each month.
That's why it’s a good idea to set aside time each month, or even week, to review your financial position. This involves reviewing the balances in your accounts, upcoming payments, discretionary spending, and other financial commitments.
By reviewing your finances regularly, you can identify and address financial red flags before they become bigger issues. These reviews also allow you to transfer money from one account to another, to make additional income, and make alternative arrangements to avoid late payments.
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Preventing late payments is essential if you want to maintain a healthy credit score and credit history. Your credit score is a reflection of your credit history. While a single late payment may not ruin it, a habit of late payments can leave a negative impact.
By implementing our tips and strategies, you can avoid late payments and maintain a healthy credit score.
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As one of the UK’s leading online lenders, we offer the assistance you need when you need it the most. Our ‘More Than Your Score’ loans provide access to emergency money, irrespective of your credit score.
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