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5 Steps To Fixing Your Credit

What happens if you don’t pay your monthly credit card bills?

It’s a common scenario: a person gets their credit card bill and they find themselves not having enough money to make the monthly payment.

After a single missed payment, you will be charged a late fee. This late fee will be added to your credit balance. Then , your interest payments will begin to accumulate faster because your late fees were added in and you have to pay interest on late fees too. But this is just the tip of the iceberg.

In the long run, your credit score will decline if you fail to make monthly credit card payments.  If you do not pay your credit card bill again, you will be charged another late fee.  By this point, your credit card company will most likely report your late payments to the credit bureaus. Different credit card companies follow different time durations for reporting late payments to credit bureaus.

Most companies will report you when you are between 30 to 60 days late. But, once you are 90 days late, it will most definitely always be reported to the credit bureaus.

In most cases, if your payment is 30 to 60 days late, your credit score is likely to decline by 60 to 110 points. In other words, you would have to pay higher interest rates on future credit loans that you get.  In addition, your account will likely be provided to an in-house debt collections specialists.  

In case you miss 6 months of payments, you will again be charged a hefty late fee and your credit score will possibly decline below 600. This will make it extremely difficult for you to get credit in future. In addition, some credit card companies may charge off your debt by this point. They will sell your debt to a third-party collections agency who will be responsible for collecting the money from you.

It’s possible that your new creditor is a collections agency. The collection agency will resort to abusive practices to collect payments from you.

Regardless of your financial situation, aim to pay your credit card bills on time in order to avoid being harassed by collection agents and most importantly, avoid putting a dent in your credit report. If you can’t make a payment, call up your credit card company immediately to inform them of your unfortunate financial circumstances. Ask them to change your due date. If they agree, be sure to make the payment by the new due date. Alternatively, you can check out our useful credit repair strategies to strengthen your credit situation after missing your credit card payment a few times. 

How Do Credit Bureaus Work?

Think about the risks involved in lending your money to people you don’t even know on a personal level. Creditors, therefore, need a third party to act as a legitimate witness to the money changing hands here. That’s where Credit Bureaus enter the picture.

Following are a few facts about credit bureaus to create a better understanding of their workings. They can be highly effective for you as well when it comes to fast credit repair.

1.    What is the Purpose?

What if you lend $100 to a friend and they disappear from the picture just when they had to repay? It would be nigh impossible for you to track them down. Bidding adieu to your money would be the only choice left. However, creditors cannot afford disappearances of debtors. A Credit Bureau is a way to legitimize the entire procedure so that the lender and creditor can both remain accountable to the third party. Their purpose is to be the intermediary entity whose job is to ensure maximum money security for all involved.

2.    What Does the Law Say?

There are specific laws that govern the workings of a credit bureau.  The law lists credit reporting as one of the primary tasks of the bureau. The bureau has to ensure that the customer gets complete and verified credit information. To carry out their tasks effectively, the Fair Credit Repair Act (FCRA), signed in 1971, allows all credit bureaus to access the customer’s credit and personal details as per their needs and requirements.

3.    How Do They Access Your Information?

Your lenders report to the bureau. So, when you buy a TV set for your drawing room or mortgage a house, the information reaches the bureau. Similarly, your creditor sends out the history of your unpaid debts, bankruptcies, and delinquencies to your bureau to record them in your credit report. They also have access to your personal histories.              Employers generally contact the applicant’s credit bureau for the authentication of their credentials. Your histories stay in their databases for the years to come.

4.    How Do They Benefit Consumers?

Credit bureaus are the most efficient avenues to get hold of your credit report. They are the drafters and receivers of all your credit requests, debts, payments, delinquencies, and etcetera. They also have your history in their databases. So, it is very easy to contact them, for the correction of any discrepancies that can occur in your credit report.

5.    How Do They Earn Money?

Credit bureaus sell their services, usually to the creditors, including banks, credit card companies, retailers, lenders, and anyone who lends money. Apart from being a keeper for credit histories, the bureaus have several tasks to perform. They also work as marketers for the lenders in order to serve and stay in contact with their customers. They provide information on how to be an effective credit card holder besides the required data.

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