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Late Payments and Your Credit Score

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Payment history accounts for around 35% of your credit score. Even a single late payment reported to the credit bureaus can bring your score down. Plus, that type of negative information can stay on your report for around seven years.

But a couple of late payments don’t necessarily spell doom for your good credit. It is possible to maintain a 700 credit score with late payments on your credit report—you just need to know a bit more about how late payments can affect you.


Have inaccurate information on your credit report? Get a free credit report consultation


Check Your Credit Report for Late Payments

Before you address late payments, you need to find out whether any are affecting your credit history and score. Here are a few ways you can do that:

  • Get your free credit score from Credit.com. With a free account, you can review your credit report card, which grades your credit history on all five of the major factors affecting your score. That way, you can see if payment history is where you’re struggling most or if your attention should be on another factor.
  • Sign up for an ExtraCredit account.ExtraCredit gives you access to 28 of your FICO® scores and your credit reports from all three major credit bureaus. You won’t find these scores all together anywhere else, and this level of information makes it easier to tell when something such as a late payment is affecting your scores.
  • Get your free annual credit reports from each of the three major credit reporting agencies—Equifax, Experian, and TransUnion—so you can see whether they contain late payments. Through April 2021, you can get your credit report from each bureau for free every week due to help manage personal finances during the COVID-19 pandemic.

Understand the Effects of Late Payments

If you’re seeing late payments on your credit profile, don’t fret. Your Credit.com or ExtraCredit account will give you a sense of how much a late payment may be affecting your credit scores, but there are a few basics that will help you better understand the effects of late payments.

How Long Do Late Payments Stay on a Credit Report?

Most negative items, including late payments, can stay on your credit reports for up to seven years. Lucky for your credit score, the negative effect of late payments decreases over time. If you continue to make smart financial decisions—make your other payments on-time, keep your utilization low, and maintain a healthy mix of accounts—you can counteract the negative effects of a late payment. If you have a series of late payments for a single account, the entire series of late payments will fall off your report seven years after the first late payment. 

How Much Does a Late Payment Hurt My Credit Score?

How much a late payment drops your score depends on a variety of factors, including your current credit score and how late you are with your payment. The higher your score, the more a late payment will affect you. And the later you are with your payment, the more a late payment tends to affect your score. A payment that’s 30 or 60 days late won’t have as serious an effect on your credit score as a payment that’s 90 days past due.

But the decrease can be as much as 180 points for just a single 90-day late payment. That’s enough to drop your credit score from good to poor and make your future more expensive.

Here’s a summary of how late payments could negatively affect your credit scores, according to FICO’s credit damage data:

  • 30 days late: A single 30-day-late payment should not cause much lasting damage and will most affect your score when recent. Being consistently 30 days late, though, demonstrates a pattern of risk and will affect your score more dramatically.
  • 60 days late: Recent 60-day-late payments cause more damage, with greater damage caused if you have a habit of paying late.
  • 90 days late: Payments made this late can damage your credit scores significantly for up to seven years.

If you continue to miss your payments beyond 90 days, the following records might also harm your credit score:

  • Charge-offs: If you fail to make payments on a credit account for 120 days or longer, the creditor may mark the account as charged off. This means they wrote off your debt as a loss. A charge-off is a negative notation on your credit report because it shows you didn’t pay the account as agreed even if you later pay off the debt.
  • Collections: This occurs when your creditor’s collections department or a third party seeks to collect debt that was charged off as bad debt. You still owe the money, and the collections account can be reported on your credit as a separate negative item.
  • Repossessions or Foreclosures: Having a home foreclosed upon or a car repossessed are both considered serious delinquencies and lower your credit scores considerably for up to seven years.

Can You Have a 700 Credit Score with Late Payments?

You can still have a decent credit score if you have a late payment in your history. Credit scores are an ever-changing number, which means you can affect them positively with responsible action in the future. If you are late with a payment, do what you can to pay it before it becomes 60 or 90 days late. At that point, it will be very hard to keep your credit score above 700. The older your late payment, the better your options for having excellent credit if you continue to manage it properly.

Use a Goodwill Letter After a Late Payment

Creditors are the ones who decide whether a late payment is reported on your credit report. Although creditors have a general obligation under the law to make true and accurate reports, they also have some leeway to decide whether each late payment should be reported.

Because of this, consumers have a tool called a goodwill letter. This can be used to ask a creditor not to report a late payment or to remove that item from your credit report.

A goodwill letter is exactly what it sounds like: It’s a letter that trades on previous goodwill you might have gained by managing your account properly. Lay out your history with the creditor, explain why you were late, and share your plan for making sure it doesn’t happen again. Then you ask the creditor to remove the item reporting your late payment.

If you have a good relationship with the creditor, they might do this favor for you one time. Plus, it takes only a few minutes and the cost of a stamp to send the letter.

Remove Collection Accounts from Your Credit Report

Some people will tell you that once a delinquent account goes to collections, you can pay the collections agency in return for having that information removed from your credit reports. This is called a “pay for deletion,” and it’s not typically an accepted activity. That’s because collections agencies have contracts with the credit bureaus to report accurate information—otherwise, people’s credit reports wouldn’t accurately reflect their payment histories. Agencies are unlikely to risk their relationships with the credit bureaus by fulfilling a pay for delete request.

However, paying off an account could improve your score. In some newer credit score models, small paid collection accounts do not have a negative effect on credit scores. However, those scoring models are the exception, not the rule.

Address Your Credit Score with Credit Repair

If a collections account is inaccurate, you have cause to request its removal. The Fair Credit Report Act protects your right to a fair and accurate credit report. If you find late payments or collections accounts that aren’t accurate, you can send a dispute letter to challenge the accuracy of the account to the credit bureau with your side of the story. Ask the bureau to investigate the matter and make appropriate edits to your credit file.

You can work with a credit repair service if you’re not sure how to go about this process. These services send letters on your behalf and work with you to ensure your credit report is accurate and as strong as possible given the facts about your financial situation.

Late Payments and Your Credit Score

A single late payment won’t wreck your credit forever—and you can even have a 700 credit score or higher with a late payment on your history. To get the best score possible, work on making timely payments in the future, lower your credit utilization, and engage in overall responsible money management.


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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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