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Almost 18% of Middle-Income Americans Missed a Debt Payment Over the Past Year. Here's Why That's Bad News


We’re all human. It’s conceivable that in the course of your life, you may end up missing a debt payment, whether it’s a check to your mortgage lender or your auto loan issuer. But being late with a debt payment has the potential to cause serious financial damage, so it’s a scenario worth avoiding when possible.

Missed payments aren’t all that uncommon

A December 2023 survey by Primerica reveals that nearly 18% of middle-income consumers missed a mortgage, rent, car, or other debt payment over the previous year. But that’s a mistake that could cause extensive damage to your credit score.

Any time you’re late with a bill that gets reported to the credit bureaus, like a credit card or installment loan payment, your credit score has the potential to take a hit. If you blow off a payment completely (as opposed to making one, say, 30 to 60 days late), the damage is apt to be even worse.

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Once your credit score takes a dive, you may find it difficult to get approved for new loans or credit cards. You may also end up with borrowing rates that aren’t so favorable — meaning, they cost you a lot of money.

And speaking of costing yourself money, sometimes, missing a payment could result in a late fee or penalty that only adds to your costs. So imagine you’re late making a $500 car payment due to a lack of cash. By not making it on time, you risk having to pay more than $500, thereby worsening the situation.

Lower your risk of a missed payment

There are a few things you can do to minimize your risk of missing a debt payment. First, for fixed loan payments — for example, your mortgage — set up your bills to autopay out of your checking account. Also, track your spending and account balance during the month to make sure you have enough money in there to cover your bills.

As for your credit cards, because you’re not handing over cash each time you make a purchase, it can be difficult to keep track in your head of what you’re spending week after week. So a good bet is to log into your credit card accounts weekly and note your balances. If they start to climb, you’ll know to stop making charges so you don’t risk being unable to make your minimum payments.

If you do think you’ll have to miss a payment due to a lack of funds, don’t just skip it and hope no one notices. That’s not going to happen. Instead, get ahead of the problem.

Contact your credit card company or lender, explain the situation, and see what options you have. If it’s your first late or missed payment, you may get some leeway, such as a grace period to pay before financial consequences ensue.

All told, missed debt payments can cost you money in terms of fees and penalties. But they can cost you even more money due to credit score damage that results in more expensive borrowing. It’s best to do what you can to make your payments on time, all the time.

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