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Many consumers find it difficult to keep up with their bills.
To this point, 37% of Americans have been charged late fees on some type of bill in the past 12 months, according to a new report from NerdWallet.
Credit card late fees were the most common, with 21% of survey respondents incurring at least one charge. Others were charged late fees on utility bills of 10% and rent of 8%. NerdWallet polled 2,061 American adults in early April.
“Late fees are just one consequence of making late payments,” said Sarah Rathner, a travel and credit card expert at NerdWallet.
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While you can be assessed a late fee once you miss a payment deadline on a credit card or loan, it typically doesn't show up as a black mark on your credit report until you're 30 days late, Matt Schulz said. Senior Credit Analyst at LendingTree.
Experts say if you delay by 30 days or more, then it becomes more serious. Defaulting on a payment can also lead to more serious consequences, such as shutting down utility service. Some consequences can also be immediate, such as repossession of the vehicle.
“If you know you're going through a tough time financially, it's definitely better to deal with it head on and not wait,” Schultz said.
Here's how to limit the impact of late fees, and work with creditors if certain life events, such as layoffs or financial difficulties, affect your ability to pay.
“Speak directly to creditors”
If you start falling behind on your regular monthly payments, or you expect to, it's best to “talk directly to your creditors before you get into trouble,” said Greg McBride, chief financial analyst at Bankrate.com.
“This is the time when you have the most options. The further you fall behind, the fewer options there are,” he said.
Reporting your issue as soon as possible can help. If your bill is due on the last day of the month, don't wait to call your provider the day before, Schulz said.
If you contact them early, you'll have more flexibility to explain your situation and negotiate a solution, he said.
“When you can step into one of these situations and offer a solution, it can go a long way to making the conversation go more smoothly,” Schultz said.
1. Request a waiver of late fees
Cardholders can ask their card company to waive late fees the first time they miss a payment, Schultz wrote in his book, “Ask Questions, Save Money, Earn More: How to Take Control of Your Financial Life.”
But keep in mind that “the more often this happens, the less likely the lender will make a concession,” McBride said.
If you've been late on a payment once, and there's a good chance you'll be late again in the near future because of a financial problem, let your lender know, Schultz said.
“It's one thing to go to the lender every couple of months and say, 'Hey, I'm late on this, can you waive that?' It's a whole other thing to say, 'I'm late because I'm having a medical emergency or I lost my job.'”
2. Enroll in hardship programs
If you realize that making your payments has become more difficult due to an unexpected life event such as a layoff, most lenders offer hardship programs. These could help consumers by temporarily lowering interest rates and waiving fees, Schultz wrote in his book.
While specific details can vary, “the key is to participate” in those opportunities, McBride explained, because they are “designed to help you get back on your feet.”
“If you run away from the problem and fall further and further behind, it further limits your options,” he said.
3. Ask about cleaning your credit report
Even one late payment can significantly impact your credit score; This can drop your score by up to 100 points, depending on other items in your credit history.
If you make a one-time mistake, you can contact your lender and request that the late payment be removed from your credit report, experts say. While it is possible under certain circumstances, lenders are generally not fans of this tactic because it makes the data unreliable for future credit transactions.
“Your credit report is just a collection of data points that represents how well you are paying off debt,” Schulz said. If lenders start “cherry picking” what goes into the report, the data becomes unreliable and does not help lenders make decisions.
“The primary customers for credit reports are not consumers, they are businesses,” Schultz said, as the reports are designed to help businesses make lending decisions.
Although this rarely happens, if you are in an unusual situation and have a “clean history,” you can go to the lender and explain what happened. For example: If you're late with a payment due to a natural disaster, it doesn't hurt to ask.
“Strange life circumstances happen to everyone,” he said.
