How Missed Payments Impact Your Credit Score - Money Tip Tuesday

Your credit score is essential. It drives your financial opportunities and impacts how good a rate you’ll get for mortgages, personal loans, and auto loans.   

Most of us know about our credit score and are likely looking for ways to improve it, so knowing what impacts it the most is the first step in improving our credit outlook.  

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• View the Investopedia article
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Transcript:

Welcome to Money Tip Tuesday from the Making Money Personal podcast.   

If you’ve followed our previous episodes or read any of our articles, you probably already know that a credit score is determined by several different factors.   

In order to keep your score in good shape, it’s critical to understand the different factors contributing to that number and how to maintain them properly.   

A lot of this maintenance is our responsibility, so when we decide to work with a lender to borrow money, we should make sure our credit scores have been properly attended to.   

According to Investopedia, all three bureaus, Experian, Equifax, and TransUnion, factor the following weights into their credit scores.   

The two lowest percentages are each weighted at 10% and are 1) any new credit you get and 2) the types of credit you have or credit mix.  

Then there’s the length of your credit history, weighted at 15%.   

The total amount owed is a higher weighted factor at 30%. Finally, your payment history comes in as the highest factor at 35%.   

So, if you want to properly nurture your credit score, you need to pay attention to each of these categories and keep special note of the higher-weighted ones. Most importantly, you need to ensure you make your payments on time.    

Have you or someone you know missed payments in the past? If so, that likely impacted the credit score.   

I’ve missed a few payments before because I got busy in life, and my distracted brain completely forgot that a payment was coming due. Then, the due date came and went before I realized that I had forgotten to pay. This is a big problem and something we need to be on guard against. Something as simple as not paying attention to the calendar can cause this problem.  

If you’ve had this happen in your own experience, or you know someone it’s impacted, it’s important to note how it can affect you. And the real danger here is the price you pay for it. Not only do you get charged late fees, but it gets reported back to the bureaus and factored into your credit score.  

 If you find you’re struggling to remember to make your payments, there is something you can do about it to make sure it doesn’t happen again. Take the time to set up automatic payments. Your financial institution likely provides a tool within mobile or online banking to schedule recurring loan payments. For example, Triangle Credit Union allows members to do so through the LoanPay platform. This tool lets people plan their loan payments in advance, customize the payment amount, set a payment frequency, and even set the duration they want the payments to run.   

If you’re determined to not let your score suffer from hits due to missed payments, then take a few minutes and set up autopay for payment peace of mind and a healthy credit score.  

If there are any other tips or topics you’d like us to cover, let us know at tcupodcast@trianglecu.org. Like and follow our Making Money Personal FB and IG page, and look for our sponsor, Triangle Credit Union, on social media to share your thoughts.    

Thanks for listening to today’s Money Tip Tuesday. Check out our other tips and episodes on the Making Money Personal podcast.