Paying your bills is essential, but prioritize them if you must pay late

A new study shows that Americans, as a whole, saved a negative amount of money in 2005. For the first time since the Great Depression, we spent more money than we had coming in. That’s not a good sign, as many Americans already have trouble making ends meet. Our mortgage debt and credit card debt are at record levels and there’s no telling when, or if, that situation will improve. We just grind it out from month to month, paying our bills as best we can from the paychecks we have available. What’s left, if anything, goes into savings, but last year, no one saved anything.

But sometimes, for one reason or another, we can’t pay the bills in full each month. What happens then? Is it possible to pay some bills late? Which ones? Does it matter? We will look into the bill paying process and see that order does, indeed, matter.

The order does matter, both to you and to your creditors. Most lenders will report late payments to the credit bureaus, and paying late enough will put a dent in your credit score. On the other hand, few lenders will report a late payment to the credit bureaus if the late payments do not exceed 30 days. Any payments that are more than 30, 60, or 90 days late will be noted on your credit report, however.

First of all, pay your rent or house payment. Sure, it’s likely the most expensive bill you have, but you must have a place to live, and that is that. If you find yourself evicted, everything else becomes moot, so pay your housing costs first.

And make your car payment, if you have one. Not only will a late car payment show up on your credit report but depending on how you financed your vehicle, could also result in it being repossessed promptly. Having a way to get to work is just as important as having a place to live.

Credit card companies generally will not report any late payments that are less than 30 days late, so you will have a bit of a grace period if you do not pay them on time. Keep in mind, however, that you will incur late penalties as a result of a late payment. You will also likely see an increase in the interest rate on your credit card.

Finally come other payments such as student loans, medical bills and the like. Doctors and hospitals are accustomed to being paid late by insurance companies, so you may have a bit of latitude in making your payments late to them.

Don’t forget that you can often find your creditors to be understanding if you will simply call them and explain your situation. It’s far better to let them know what’s going on than to have them simply guess.

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