Fashionably Late
Like most of the other behaviors discussed in this chapter, late payments are a sign that something is wrong. If you didn't already know it, you should not pay late, because it will mess up your credit. However, if you ever get into a tight spot, it's important to know how to do it right.
Talk to Your Creditors
Creditors appreciate hearing from you if you're going to be late with a payment. Think about it from their perspective — they usually don't know you, they just have a big computer tracking everything. It could be that you've decided not to pay them, it could be that you've run out of money, it could be that you just forgot because you've been busy, or it could be that you've dropped off the face of the earth.
If you're going to be late, do your credit a favor and let your lenders know. Ask them for an extension, or just let them know not to expect the money on time. When you lend money out to people, you tend to dislike surprises, because they usually aren't good surprises. Lenders don't like bad surprises either, so don't keep them in suspense, just pick up the phone and fill them in.
How Late is Too Late?
If late payments are bad, then really-late payments are really bad. It's never too late to pay money that you owe, but you should try to minimize the damage to your credit. Late payments are usually measured in increments of thirty days. For example, most reporting tracks whether you pay more than thirty days late, more than sixty days late, or more than ninety days late. As you can probably imagine, the later you go, the more it bothers the lender.
From this, you can tell that it's best to pay within thirty days if you're going to pay late. That keeps you from crossing the thirty-day threshold and being reported as more than thirty days past due on a payment. This doesn't mean your lender won't charge you late fees and take other steps to penalize you, all it means is that your credit reports will likely be in better shape.
Occasional late payments, even thirty days late or more, might not be reported to the credit bureaus. Don't take advantage of it, though. Lenders give you a break because they know that everybody makes mistakes. If you start to make a habit out of late payments, they'll report each and every one.
Sometimes lenders don't even report late payments to the major credit-reporting companies unless you go over sixty days late. Again, you can minimize the damage by staying under sixty days. If you really have to push it, then stay under ninety days. Otherwise, creditors will think you're a serious risk, and it will certainly be on your credit reports for a long time to come.
