Much as you know that you should not put off your credit card payments and utility bills, you often get tempted to do so when you are low on cash. You can ignore the ramifications of late payments, but as they continue to mount up, the debt spiral continues to grow. The use of credit cards aims at making urgent purchases when you are running out of money, but people swipe them even to make impulsive purchases.
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If you do not pay off bills, your credit score plummet. It reduces your chances of taking out a new loan at lower interest rates. Bad credit rating calls your creditworthiness into question, and if you need loans for an emergency in the UK. If you want to avail of a loan at attractive interest rates, you should pay all of your bills including utility expenses on time. Well, timely payment of credit card bills not only boosts your credit score but also provides you several other benefits.
- No added interest
Whether you are making minimum payments or avoiding the full payments, it will cost you in the long run. Credit card interest accrues every day. The higher the balance, the higher the interest will be. Outstanding dues also attract late payment fees. When you make a purchase with a credit card, you should pay off the balance within the grace period.
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Make sure that you do not make transactions that do not fall within the grace period. Timely payments will save your money in late payment fees and interest penalties.
- The collection will not stay at your credit report
If you have been delinquent in paying off bills, the credit card company will turn to debt collection agencies. Even a smaller amount of bills can be sent to the collection agency if you have been avoiding payment for a long time. The agency will keep chasing you to pay off the debt I full.
You will not get a chance to make partial payments and further it will stay in your credit report. Once it shows up in your credit file, the lender will not lend you money at affordable interest rates. If you do not want to have your account gone to the collection agency, try to make payment in time.
- Improves chances of owning a house
When you take out a mortgage to buy a home, the lender will consider your credit score, the level of current debt and financial condition. If you have been avoiding timely payments of utility expenses, service cost and credit card bills, your credit score will be dinged.
Lenders may turn down your application or will ask you to put a larger deposit. Buying a home is a very critical process even if your credit score is excellent. You should try to make payment of all of your bills on time if you do not want to struggle to get onto the property ladder.
- To enjoy financial security
Debt seems to be very expensive as you have to pay interest on top of what you owe. This causes an additional burden on your pocket and it continues to rise unless you settle all of your dues.
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Timely payment of debt makes sure that your money will not go wasted in late payment fees and interest penalties and you can utilize that money to meet unforeseen expenses or invest somewhere to earn interest.
- Your bad credit score will improve
Loans do not aim at helping you tide over when you are running out of money but also help you improve your credit score. Installment loans help borrowers with impaired credit score to build credit rating.
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The credit score will go up if you make all payments on time along with utility bills, medical bills and credit card dues. The delinquency in the payment of any debt can take a toll on your credit score. Timely payment will help you have repaired flaws in your credit file.
- The bottom line
Timely payment of bills is extremely important to maintain a good financial record. Emergencies can crop up anytime and you may need to take out a loan. You will likely get money at an affordable interest rate if your payment history is excellent. Otherwise, you will not only face rejection for new loan applications but also pay high-interest penalties on your current bills.
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