How to get a Good Credit Rating and the Long Term Effects of Late Bill Payments

It is not easy getting or maintaining a good credit rating, but the long term effects of late bill payments means it is essential in these unstable financial times. For those new to the game; school leavers and first time earners, it is important to understand the rationale behind the thoughts of suppliers and money lenders. For the rest of us, it is a timely reminder to look at how we handle our money on a monthly basis and reinforce our standing in the credit community.

Sometimes simply managing a budget may not be enough if all your bills are due at the same time. The electricity bill arrives on the same day as the phone account. Car registration is due along with the insurance. For home owners there may be council and water rates that all fall in the same month. It looks as if this is another month where you will only get to pay the minimum on the monthly credit card balances. The limp vegetables in the crisper will not supplement a meal, even when added to the staples in the pantry and the car is running on empty.

These are tough times and no one disputes that, but they can be turned around at any time. The situation may be a result of outside factors but the outcome of any situation is entirely up to you. Change it, move forward and take control of your finances.

When money is tight, the initial reaction may be to hold off on payments for the general utilities but this can have disastrous long term effects on your credit rating. For every overdue notice received, there is a black mark checked against you. Most people are unaware of the fact that if you make a late bill payment to one supplier that black mark will be used against you with all your other suppliers.

Long Term Effects of Late Bill Payments

There is no immediate cure. A bad credit rating can follow you for many years to come unless you make positive steps to improve the way you pay your bills. As painful as it sounds, preparing a workable budget, is a good start to correcting any past bad records and setting the scene for the future.

• Prepare a budget based on yearly income
• Allocate for essential items on a weekly basis
• Set aside some savings for future emergencies
• Talk to your suppliers

Prepare a Budget

As painful as it sounds, preparing a workable budget, is a good start to correcting any past bad records and setting the scene for the future. Have a good look at your expenses and previous payments for the year and make calculations for the next year.

Allocate the Essentials

By averaging out your weekly payments you can allocate the necessary funds for essential items on a weekly basis. Take into account that the first year you will need additional funds. If the car registration is due in January, a weekly proportion is not going to cover that initial payment.

Save a Small Percentage of Income

Putting aside a decent percentage of income for savings that can be accessed for emergencies will help with those payments that come up unexpectedly. Ten or twenty per cent of your income (if you can manage it) will see you in a solid financial position after six months. If you have budgeted well and saved some of your income, at the end of the first year you will have enough to cover all your monthly bills as they fall due.

Keep the Lines of Communication Open

When all else fails and the phone bill arrives or the electricity account is looming, pick up the phone and call your suppliers. Let them know you are having trouble meeting your requirements. You may be pleasantly surprised at how accommodating the major utility companies are if you approach them for alternative terms of payment.

By applying some basic steps to the way you handle your weekly finances you will be well on your way to improving your credit rating. This will put you in good stead for future relationships with your bank or financial institution when it comes time to ask for some serious dollars.

Forming a sound relationship with your finance provider from the beginning could mean the difference between a yes or no on your home loan request. Paying bills on time sets the scene. If the major utility companies are happy with you the more chances you have of being approved for loans; personal, business, home mortgage or even for investment, when you need them.