What bills can you pay late? If you’re strapped for cash, are there certain bills you have to pay right away and other bills you can wait to pay?
Paying bills on time is the only way to ensure a good credit score. According to FICO, the company that figures credit scores, even a single late payment can sink a credit score anywhere from 60 to 110 points.
But how late is late? Do some late payments hurt credit scores more than others?
The answer is, a late payment doesn’t hurt a credit score until it gets reported to a credit reporting agency. When that happens depends on the type of bill and the policies of the lender.
What Bills Can You Pay Late?
Everyone wants to pay their bills on time, but sometimes there’s only so much money to go around. Decisions have to be made. When that happens, it’s good to have a plan to prioritize bill payments, much like performing triage in a mass medical emergency. With triage, healthcare workers decide which patients are most critical and need attention first, and which have mild injuries that can wait a bit for treatment.
In the same way, some bills are more urgent than others. We’ll list them in order below.
Never Pay These Bills Late
In this section we list bills you should never pay late. They include:
- Home mortgage payments
- Car loan payments
- Credit card payments.
- Utility bill payments
- Tax payments
How Late is Late?
With home loan payments, car loan payments and credit card payments, there’s usually a 30 day grace period between the due date on the bill and when the financial institution will report the late payment. “Usually” because the grace period is based on a publication called the Metro 2 Credit Reporting Resource Guide. The Metro 2 guide offers guidelines, but not rules, so banks aren’t required to offer a 30 day grace period.
That said, even if a bank does report a late payment that’s only 15 days late, the credit reporting agencies probably won’t use that information to lower the customer’s credit score.
How Much do Late Payments Hurt a Credit Score?
Once a late payment has been reported, even a single late payment can drop a good credit score by anywhere from 60 to 110 points, and much higher drops of 150 points have been reported. After a payment is 180 days late, it usually gets turned over to a collection agency. At that point, severe damage to the credit score occurs.
Home Mortgage Payments: Never Pay Late
According to credit reporting bureau Experian, late payments on home mortgage bills are a big no no. Banks take on-time home mortgage payments very seriously. For that reason, the payments are reported to credit reporting agencies almost 100% of the time.
When a home loan customer makes an on time mortgage payment, the bank reports that on time payment to the credit reporting agencies. That in turn helps the customer’s credit score. But when a customer makes a late payment on a home loan, the bank reports that also, thus hurting the customer’s credit score.
In other words, banks routinely report the status of all payments for home mortgage loans, whether those payments are late or on time. Since you can be sure the payment is going to be reported no matter what, it’s vital to your credit health to make all home loan payments on time.
Car Loan Payments: Never Pay Late
Be warned that the 30 day grace period won’t always protect you. One commenter on Equifax’s blog reports that he made his car payment on time, but the dealership held it for two days before depositing it, then reported it late. His credit score dropped 51 points.
Credit Card Payments: Never Pay Late
Credit card companies have built their entire business on providing credit. When a customer makes a payment on a credit card, it gets reported. When a customer fails to make a payment, that gets reported too.
Making credit card payments on time will always help a credit score. Making late payments on credit cards will always hurt.
Even considering the 30 day grace period, it’s a good idea to pay credit card payments on time. Someone who pays their bill 3 days late but well within the 30 day grace period will still be assessed a late payment fee.
One commenter on Equifax’s blog reports that a late payment of just $7 that was 57 days late dropped his score a full 72 points.
Utility Bills: Never Pay Late
Look around the internet, and you’ll see a lot of people saying it’s O.K. to pay utility bills late. But ask Experian, one of the companies that creates credit scores, and they’ll tell you that’s bunk.
According to Experian, most utility companies will in fact report late payments, even if they’re only 30 days past the due date. One commenter on Equifax’s blog notes that just a single late payment on her energy bill had a damaging effect on her credit score.
Late payments of just 30 days on any of the following will hurt your credit score:
- Power bills
- Cell phone bills
- Water bills
- Heating bills
- Gas bills
- Any other utility bills
- Internet provider bills
On Time Utility Payments Don’t Help
Many have complained that it’s unfair that although late payments on utility bills hurt credit scores, on time payments don’t help.
While on time payments on credit cards, home loans and car loans all help a credit score, on time payments on utility bills don’t do a thing. That hardly seems fair, since late payments on those bills will all hurt a credit score.
Bills You May Be Able to Pay Late
It is never a good idea to pay a bill late. Any late payment that gets reported to a credit reporting agency will damage a credit score. However, desperate times call for desperate measures. The list of bills below are less likely to hurt a credit score than others:
- Rent payments
- Medical bills
- Bank overdrafts
- Insurance payments
- Child support payments and alimony
Late payments on any of the above bills could easily get reported to a credit reporting agency and ruin your credit score for years. However, there’s at least some evidence that the payments listed above are less likely to be reported right away.
A landlord, for example, can report late rent payments after the payment is 30 days late. However, many of them don’t report late rent payments. The best way to find out is to ask the landlord to warn you before they report a late payment.
Generally, the payments above won’t be reported as late until they’ve gone to collection agencies. Accounts are usually turned over to collection agencies once they’re 180 days late. At that point, the damage to the credit score is severe.
Can One Late Payment Affect My Credit Score? – Equifax.com