It is hard to get through life without a credit history. A good credit history that shows a history of on-time payments reflects your creditworthiness to potential lenders.
A credit score is just a three-digit number. But this three-digit number encapsulates your current creditworthiness to the financial world.
Your credit score can determine whether or not you get a personal loan, a mortgage, or a car loan.
Most potential lenders will use one of two creditworthiness scoring bureau models, FICO or VantageScore.
And your credit score can range anywhere between 300 and 850, but the average American’s credit score is about 700.
What if you are late?
Are you a credit card owner used to paying your bills late? Then you should get out of the habit soon.
You may not know it, but FICO changed its credit scoring metrics in 2020, and it is now going to be very expensive and detrimental to your credit score to pay outstanding balances late.
Credit card users judged by the FICO creditworthiness metric who regularly fall behind on their bill payments will see at least a 20-point drop in their credit score.
Delinquent credit card users who apply for personal loans, which don’t require collateral, could be flagged by FICO as risky applicants on their credit history.
Getting into the habit of paying your credit card balances on time can be easier said than done. Many Americans are struggling financially. And constantly paying outstanding balances late only accelerates falling down a slippery slope of cascading late fees.
Your credit score will take a hit after 30 days of non-payment for every late payment fee.
But there is something you can do to give yourself a small reprieve from late fees.
Just ask for a waiver.
Late fee waiver
All you need to do is ask your credit card company to grant a late fee waiver.
If you have a history of paying on-time most of the time, they should grant you a one-time or occasional 30-day waiver.
Diplomatically and politely explain your situation. Ensure the representative that you speak to that you will do your best to pay on time in the future.
Ask to be enrolled in an SMS text payment due reminder system. Or ask if there is an automatic payment or payment plan system you can enroll in.
Just know that the credit card company is not entitled to grant you a waiver. And ask before your payment deadline.