Late Payments Lower Your Score — And Could Prevent You From Getting a New Apartment

couple at their new empty apartmentYou were late on a bill or two last month, so what, right? While it’s true a late payment here or there probably won’t hurt your credit score too much, multiple late payments (even if it is within just one month) could do significantly damage. It’s important to pay your bills on time for good credit and for getting a new apartment. Apartment managers look at your credit score as well as your payment history to determine if you will be a reliable tenant, which means too many late payments could mean no new apartment for you.

The Myth About Late Payments

There is a common misconception out there that late payments don’t affect your credit score. But the truth of the matter is they do. Yes, if you catch up before the late payments are reported, you might get away with those late payments and no damage to your credit report, but frequently late payments can slowly damage your credit score over time — and take twice as long to repair.

Understanding the Derogatory Differences

Any late payments that are over 90 days late are considered major derogatory marks on your credit report and anything under 90 days is considered minor. If you have any major defaults, which is usually after 90 days — depending on the creditor — you’ll see a drop in your credit score. Also, credit accounts that are over 90 days past due often are sent to third party collectors and could lead to foreclosure, tax liens, judgments and harsh collection tactics.

Your Score and Credit History

It’s not just your credit score that you have to worry about. Apartment managers look at your overall credit history report. Even a good score could be denied if you have a history of late payments. Late payments are indicators that you handle your finances poorly and are unreliable — something apartment managers don’t want to see in tenants about to sign a lease with them.

What You Can Do

If you have late payments, sometimes you can talk with the creditor and see about reducing the days or erasing them. Even if the creditor won’t remove the late payment mark, you may have an excuse as to why you were late on your payments that month — such as a loss of job, medical emergency, etc. Regardless, have your reason and documentation proving that reason ready when you apply for a new apartment. Some apartment managers can override a poor credit score or history, especially if you have proof as to why this happened and you have a few months or years of positive payment history after that event.

If you are having trouble paying your bills, you may need financial counseling. It’s important to pay your bills on time and stick to a budget that is realistic. Limit your spending, track your finance and set up automatic payments or bill pay reminders so that you can reduce the number of late payments you have on your credit report.

Mar 2014