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Late Payments Do Not Just Hurt Credit Score

By Sally Maison
Published: Thursday, December 3rd, 2009

Cardholders who are not able to keep up with their monthly bills see their credit score drop. But a recent report reveals more consequences for late payments.

Late Payments Do Not Just Hurt Credit ScoreThe Associated Press revealed this week that American Express is forfeiting miles or points clients have earned if they are not able to make their monthly payment on time.

The news group further informs the public that cardholders who want their miles or points back will have to pay $29, aside from the late fees applicable as well as the penalty interest rates. AP found out that American Express has been implementing similar provisions in recent years and other creditors also have comparable policies for cardholders who drift behind their payment.

Analysts say banks and other creditors are making their move towards anticipated loss in profit as new federal regulations take effect in February 2010. Starting next year, regulations will limit the interest fees and late payments lenders can impose on cardholders.

Consumers who pay their bills late will see their credit score drop. Finance experts say the damage could last up to seven years, depending on how often a person misses a payment date and how long he pays after the bill is overdue.

After six months of not receiving payment, creditors will decide whether or not to charge off a cardholder’s debts. Consumers whose accounts are charged off will have their accounts closed. However, they will remain responsible for the amount they owe and will continue to experience the effect on their credit score for seven years.

Consumers who are lagging behind their payment are urged to contact their creditor and negotiate for new payment terms. Finance advisers say this will still hurt their credit score, but not as much as delinquent payments.

Last July, American Express and Capital One reported that delinquencies, those payments made thirty days past due, went down during its previous month. However, finance experts worry that consumers will be accumulating huge debts as the year ends because of the holiday season.

Specialists advise consumers to be mindful of their spending in order to avoid racking up too much debt. They remind consumers that they need to keep their credit ratings high, especially that creditors have increased their lending standards.

Cardholders who have experienced a charge-off are advised to pay off remaining balance. Experts say consumers will not immediately see its effect, but it will help their credit score in the long run. They add that it can boost a credit rating by a hundred points or more.

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