Credit Tips

Avoiding Mortgage Late Pays

A good credit score is important for more reasons that just obtaining new credit. These days, it can factor into everything from landing a new job to getting the best deal on your insurance policies.

A 100 point drop for one late mortgage payment? It’s true. A single 30-day-late mortgage payment can cause your score to drop by as much as a hundred points. Credit scoring algorithms vary based on many factors, and in some instances, the damage may be even greater and last for years.

The costs accumulate. At the time, a single missed payment will cost you only a late fee, but the expense really adds up on your next loan or missed opportunity. Low credit scores typically mean a higher rate and cost. Higher rates can mean hundreds of thousands of dollars extra expense over the life of a loan.

Missed payments are usually unplanned. Usually, events beyond our control lead to late payments, such as an accident, illness, job loss or a hectic life may result in a forgotten payment.

What can you do?

Plan for the unexpected. Maintain an emergency cash reserve account equal to at least three months of living expenses or more.

Automate. If you’re prone to forgetting or don’t have a scheduled time to sit down and pay bills, set up auto payments through your checking account or put a perpetual reminder on your calendar.

Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy. If you don’t already have a good system in place to assure timely payments and are not sure what’s best, reach out anytime. We’ll be happy to set up a plan that’s right for you.