Are some bills less critical than others? Paying bills late can really damage your credit history and credit score. But if you’re in a major bind and need to temporarily pick and choose, here’s what to take care of first, and what can wait.
Real Estate Taxes
If you own a home, real estate taxes are mandatory. A municipality has the right to issue a lien certificate or property deed on your home if you’re delinquent on paying your property tax, which is usually due quarterly. Failure to pay your property taxes is the quickest way to lose your home, more than being late on your mortgage, since tax liens takes precedence over a bank mortgage.
No one likes a visit from the repo man. Auto loan companies send these predators to nab your vehicle without warning. And a default on your loan may be equal to just one missed payment, depending on the terms of your contract. Car loan defaults are up 15 to 20% since last year. Since your car transports you to work, and work brings in money, this is one debt you really can’t afford to ignore. If you think you’re going to fall short on money next month, call your creditor and see if they will temporarily ease your terms or help you refinance altogether. Make parking tickets a priority too. Failure to pay by the due date can get your car towed.
If you think you’re going to be late on your mortgage, call your bank and ask for some relief. Your lender can help you refinance or cut you a break for the month. If you miss a payment one month, you will most likely face a late fee, plus last and next month’s mortgage at the same time. Slip up more than twice and it gets ugly. Banks usually start foreclosure proceedings after three months of missed payments.
If you don’t pay your monthly rent on time, the landlord will likely send you notice to pay within five days, or move out. If you don’t move or pay up, the landlord will then issue a summons and complaint letter, legally starting the eviction process. You’re expected to either defend yourself in court or do nothing and lose by default. Soon after a marshal will then show up at your door and order you to leave.
Store Credit Card
A store credit card usually carries a higher interest rate than any other type of credit card. While creditors won’t come to your house and take away that merino wool sweater you still haven’t paid off using your Banana Republic (GAP) card, the interest and fees on that debt will balloon fast. Paying these bills an hour late can be reflected on your credit report and knock points off your credit score. At the least, pay 10% more than the required minimum payment so you’re a) contributing to the principal and knocking down the balance and b) curbing phone calls from the collection agencies.
Bank-issued credit cards, like American Express (AMX), Visa (V), MasterCard (MA) and Discover (DFS), tend to carry lower interest rates than store-issued credit cards. That said, if you’re late or only paying the minimum, expect rates to jump, and see your credit score get hit.
This is relatively “good” debt considering it carries a lower interest rate than most other financial obligations, and it won’t harm your credit score. Plus, loan officers may allow you to defer payment on federal loans if your financial situation proves particularly dire.
It usually takes four or five months of non-payment for the cell phone provider to send the collection hounds after you. Until then, you face late fees and a bill that continues to grow.
In the grand scheme of things (considering your house and car), how important is paying to watch the Tudors on Showtime (CBS)? If you can’t afford cable, quit while you’re ahead. Before you actually need to miss a payment, just cancel it.
If it’s the dead of winter and you’re experiencing financial hardship, know this: During the winter, utility companies are prohibited from shutting off your heat. Further, if you’re a senior citizen, are part of a low-income family with an infant or have a serious illness, your heat must stay on at all times, despite missing the payments. Also, if your landlord is behind on paying the building’s utility bill, it’s not your fault and you should still receive running water and heat. Call the utility company and explain your situation. Generally, utility companies can shut off service after 25 days of delinquency.
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