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Many consumers are finding it hard to keep up with their bills.
To that point, 37% of Americans have been charged a late fee on some kind of bill in the last 12 months, according to a new report by NerdWallet.
Credit card late fees were the most common, with 21% of survey respondents incurring at least one. Others had been charged late fees on utility bills, 10%, and rent, 8%. NerdWallet polled 2,061 U.S. adults in early April.
“Late fees are just one consequence of making late payments,” said Sara Rathner, a travel and credit cards expert at NerdWallet.
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While you can be assessed with a late fee as soon as you miss the payment deadline on a credit card or loan, it typically doesn’t show up as a black mark on your credit report until you are 30 days late, said Matt Schulz, chief credit analyst at LendingTree.
And if you’re late by 30 days or more, that’s when it starts to get more serious, experts say. Falling behind on payments can also come with more severe consequences, like having utility service shut off. Some consequences can be immediate, too, like car repossession.
“If you know that you’re going through a financial rough time, it’s definitely better to tackle it head on and not wait,” Schulz said.
Here’s how to limit the impact of late fees, and work with creditors if certain life events, like a layoff or financial hardship, are impacting your ability to pay.
‘Speak directly to you creditors’
If you are beginning to fall behind on usual monthly payments, or anticipate you might, it’s best to “speak directly to your creditors before you run into trouble,” said Greg McBride, chief financial analyst at Bankrate.com.
“That’s when you have the most options. The further behind you get, the fewer options exist,” he said.
Communicating your issue as early as possible can help. If your bill is due on the last day of the month, don’t wait to contact your servicer the day before, Schulz said.
If you contact them well in advance, you have more flexibility to explain your situation and negotiate a resolution, he said.
“Whenever you can go into one of these situations and offer up a solution … that can go a long way to making the conversation go a lot more smoothly,” Schulz said.
1. Ask to waive a late fee
Cardholders can ask their card company to waive a late fee the first time they miss a payment, Schulz wrote in his book, “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life.”
But keep in mind, “the more often that happens, the less likely,” the lender will offer a waiver, McBride said.
If you paid late once and there’s a high chance you will pay late again in the near future because of a financial issue, let the lender know, said Schulz.
“It’s one thing to go to the lender every other month and say, ‘Hey, I was late with this, can you waive that?’ It’s something else entirely to say, ‘Hey, I was late because I have this medical emergency or I lost my job,'” he said.
2. Enroll in hardship programs
If you realize that your payments are becoming harder to meet because of an unexpected life event such as a layoff, most lenders offer hardship programs. Those can help consumers by temporarily reducing interest rates and waiving fees, wrote Schulz in his book.
While the particular details can vary, “the key is to partake” of those opportunities, as they are “designed to help you get back on your feet,” McBride explained.
“If you run from the problem and just fall further and further behind, it just further limits your options,” he said.
3. Ask about cleaning up your credit report
Even one late payment can make a significant dent in your credit score; it could drop your score by up to 100 points, depending on other elements of your credit history.
If you made a one-time mistake, you can reach out to your lender and ask to have that late payment scrubbed from your credit report, experts say. While it’s possible under certain circumstances, lenders are generally not a fan of the tactic because it renders the data unreliable for future credit transactions.
“Your credit report is just a collection of a bunch of data points representing how good you are paying debts back,” Schulz said. If lenders begin to “cherry pick” what goes on in the report, the data becomes unreliable, and it doesn’t help lenders make decisions.
“The primary customers for credit reports are not consumers; it’s businesses,” said Schulz, as the reports are devised to help businesses make lending decisions.
Even though it is rare to occur, if you’re in an unusual situation and otherwise have a “spotless history,” you can go to the lender and explain what happened. For example: if you paid late because of a natural disaster, it doesn’t hurt to ask.
“Weird life circumstances happen to everybody,” he said.
