Everyone, above a certain age, has bills to pay.
Regardless of how you live your life, you end up having to deal with at least several each month. In fact, it’s not uncommon for people to accidentally miss a payment every now and then.
Anyone who claims to have never forgotten a bill is either lying or has forgotten that they forgot.
Jokes aside, missing a payment – whether intentionally or not – can have a big impact on your financial goals. You might think nothing of it, but it could easily set back your plans in more ways than you expect.
You will end up paying more
Missed payments can incur late fees, higher interest charges, and higher interest rate; depending on what you missed and how long it has gone unpaid.
For instance, many phone utility companies may not impose late fees if you are late in your payment by a couple of weeks. However, most major telcos do impose some sort of financial penalty for non-payment of monthly bills to try and make sure that customers keep up with payments.
Similarly, credit card companies impose fees if you fail to meet the minimum payment on your bill at the end of the month. These late payment fees can be rather substantial, especially if you constantly forget to make your payments. For example, Citibank will charge you up to 1% of your total owed amount if you miss a payment.
As if that’s not bad enough, you will also end up paying more in interest. Being late in your credit card payment will cause your interest rate to go up from 15% to 17% or 18% per annum.
These fees and charges can potentially add up and eat into your ability to eventually pay the bills, which in turn makes it much harder to clear your debts.
It can show up in your credit score
Not every missed bill will affect your credit score. In most cases, there’s not too much of a penalty for missing an installment for your washing machine. Unless missed many payments and your lender listed you as a defaulter with a credit reporting agency.
However, credit reporting agencies take payments to utility companies, credit card providers, and financial institutions a lot more seriously.
Even if you forget to pay small outstanding amounts leftover in your bill after you have discontinued the service, the utility company may choose to report this non-payment after a certain amount of time. It is best to have a discussion with your lender if you find any difficulties in your loan or credit repayment. Many lenders continue to extend the repayment assistance for example, extension of moratorium.
One bad score can lead to many financial problems
Taking a credit score hit is not something that can affect you immediately in your daily life, but it has much more serious financial impact than you may think. This is because banks and other financial institutions use it as a measurement of your quality as a customer.
A lower credit score tells these companies that you may be unreliable with payments or may even fail to pay off your loan. This can lead to difficulties in obtaining credit products like credit cards or loans of all kinds. It can also lead to frequently rejected applications for financial products or having your loans offered at a higher interest rate.
In turn, this makes achieving your long-term life goals a little more complicated by preventing you from being able to secure a loan for your dream home, or delay plans because you are spending a bigger portion of your salary on loan repayments.
What can you do to keep your credit healthy?
Don’t let your hard work in keeping up with your monthly housing and car loans go to waste over a couple of missed utility bills. Even amounts as low as RM10 in a long-forgotten phone bill account for a service you have cancelled ages ago can affect your credit health.
When this happens, you will need to put extra effort into paying bills on time regularly to get your credit health back on track. Making up for one small, missed payment required a lot more time and effort.
- Check your credit score
The is the best way to get you up to date on your credit health. It gives you an idea of how well you’re handling your credit, and also gives you useful information about your missed payment history – including bills that you may have forgotten about. This credit score report will provide a summarised reference for what you’ve done wrong to help you figure out what to do next (hint: it’s most likely paying the bills on time). How you go about this generally depends on your situation. Financial advice is not a one-size-fits-all solution.
- Consider setting up automatic transfers
However, once you’ve figured out the plan, it would be useful to automate your payments for regular items like monthly utility bills. That way you won’t end up forgetting to pay the bills and help break the downward spiral.
- Continue to monitor your credit health
You should also check back on your credit score every few months to see how you’re getting on. You might feel the need to check more frequently to get a sense of accomplishment, but credit rating agencies usually take a few months to make changes to your credit score.
Although there are many other factors that may affect your credit score, one of the biggest and likely most common factors is promptness in making your loan and bill payments. To ensure you are on top of your progress to improve your credit score, we recommend checking your score every 3 to 6 months.
Keep your goals on track with Experian’s PCRP
If you’re looking for a way to monitor your credit score, why not check out Experian’s PCRP. It offers a comprehensive report on your credit score, your financial status, and even includes updates to help protect you from identity theft.
How Experian’s PCRP helps maintain your credit health:
- Collate information from Bank Negara Malaysia’s Central Credit Reference Information System (CCRIS).
- Notify of any litigation against you, or even if you still owe PTPTN money.
- Only ISO certified credit reporting agency in Malaysia to provide alerts when financial institutions make inquiries about your credit.
- Let you know if someone is trying to take out a loan in your name.
It’s a complete credit report that helps you decide on what needs to be done to keep your financial goals on track.