Unpaid Bills and Credit Scores

 

Unpaid bills result in poor credit scores for all debtors; this is true for any one of us. While one unpaid bill will not necessarily cause your credit score to implode, the accumulation of various kinds of delinquent bills will result in a poor credit score very quickly.

 

 

Unpaid bills, like credit cards, may also have very high rates of interest.  If you take the time to read the fine print on your credit card contracts you will see where the danger lies.  Most credit cards will increase, usually double or more, the interest rate charged on outstanding unpaid bills.  This means a bill you left standing with $500 at 9% overdue, can quickly snowball into something much more serious when that interest rate goes into a default rate of 18% or higher. These interest rates often cause your unpaid bills to excel into a large outstanding amount which makes the payment of these bills even more difficult than before. All unpaid bills are reported to the crediting bureaus. These bills are then added to your credit report and affect your score negatively.

 

credit scores

 

Bills Which Affect Credit Scores

 

There are many kinds of bills which affect credit scores, in fact most bills you incur do. These include but are not limited to medical bills, utility bills, credit card bills and various other bills for services such as cable or cellular service. The majority of these bills are set on a monthly payment structure.  Failure to meet these monthly payments means a ding on your credit report and subsequent score.  In some cases, such as utility bills, there are steps you can take to eliminate the damage from an unpaid bill impacting your credit score. The partial payment of these bills helps in preventing them from being reported to collection bureaus. Utility bills are the only type of bills that this exemption applies to, so don’t try this with just any outstanding bill.

 

Credit card bills have a great influence on credit scores and are where most people injure their credit most severely. Since credit cards bills are revolving debts their interest rates can be subject to change, usually depending on your credit standing when you opened the account or actions you take during the course of the credit card’s life span. As a result credit card debts often have the greatest potential to weaken credit rating performance when they are not well-managed. Medical bills, which can very often be of extremely high amounts, also affect credit scores when reported to your credit report. These bills are reported usually after a period of 30 days and count against you just as any other delinquent bill would.

 

credit score

 

Payment Options for These Bills

 

There are various ways through which bills can be settled on time, should you find yourself unable to make full on-time payment. One of the best ways to pay utility bills is through partial payments. This option also works for the credit card bills, paying a minimum payment, often as low as just $15 is usually allowed.  However, pay attention to the fact that while making this monthly payment, your debt level will continue to increase. Direct negotiations with banks and creditors can help in getting an easy installment payment plan if you are having trouble making your financial commitments. 

 

Video: Reduce Your Medical Costs

 

It is of paramount importance that this process be started well in advance of stopping or missing payments.  Medical bills can most easily be negotiated down by contacting the medical provider yourself.  Everyone loses when accounts go uncollected to debt collectors, and many credit issuers are negotiable when faced with losing the account completely.

 

Improving Credit Scores through Bill Consolidation

 

Video: Suze Orman - Is Debt Consolidation a Scam?

 

One of the most convenient methods of successfully eliminating bills is through bill or debt consolidation loans. These loans are provided to the debtors through debt consolidators or other lending institutions directly such as banks. A new loan is given at a lower interest rate, significantly lower if you can secure the loan with a piece of property such as your home.  This new lower interest loan will then be spread out over several years in an effort to make the monthly payment low and easily within your reach.  The loan amount taken will be used to pay off your existing debt and bills.

 

The new loan will then become your sole new debt, making the others go away and saving you substantial amounts of money over the typically higher, older interest rates.  Moreover the debt consolidation loan will give you peace of mind just making one simple easy payment each month.  Taking back control of your debt with a debt consolidation loan can be the solution to your current debt problems.  Best of all, your credit report and score will not be negatively affected, but actually improved by completing all your outstanding debt.  The new loan will help you continue to build positive payment reports over time.