Repairing Your Credit Score After Late Payments
Intro
Late payments can significantly impact your credit score, making it vital to understand how to recover from them. Financial health and credit management are interconnected, and a poor credit score can hinder opportunities such as loan approvals or favorable interest rates. In this guide, we delve into the essential aspects of credit scores, factors that influence them, and strategic methods to elevate your score after falling behind on payments. By grasping these concepts, you can regain control over your financial future and boost your creditworthiness.
Understanding Credit Scores
What is a Credit Score?
A credit score is a numerical representation of an individual's creditworthiness. This score typically ranges from 300 to 850, where higher numbers indicate better credit health. Lenders use credit scores to evaluate the risk associated with lending to an individual.
Importance of Credit Scores
Credit scores hold immense significance. They not only determine your eligibility for loans but also influence the terms of your credit, including interest rates. A high credit score generally allows more favorable terms, saving you money over time. Conversely, a low score can lead to higher costs or outright rejections.
How Credit Scores are Calculated
Credit scores are calculated based on several factors. The most critical components include:
- Payment History (35%): This is the most substantial factor, showing whether you pay bills on time.
- Credit Utilization Ratio (30%): This ratio compares your credit card balances to their limits.
- Length of Credit History (15%): A longer credit history can positively impact your score.
- Types of Credit Accounts (10%): A good mix of different credit types is beneficial.
- Recent Credit Inquiries (10%): Too many recent inquiries may signal that you are taking on too much new debt.
Common Myths About Credit Scores
Many misunderstandings exist about credit scores. Here are a few:
- Checking Your Own Credit Score Hurts It: Checking your score is a soft inquiry and does not affect it.
- You Need Debt to Build Credit: Not true. You can build a score with responsible use of credit.
- Paying Off Collections Eliminates Negative Impact: While paying off collections is wise, it does not remove the negative mark from your report.
Factors Affecting Your Credit Status
Payment History
Your payment history remains the most crucial element influencing your credit score. Late payments can linger on your report for up to seven years, consistently impacting your creditworthiness. The more recent the late payment, the heavier the effect.
Credit Utilization Ratio
The credit utilization ratio is the balance you owe relative to your total credit limit. Keeping it below 30% is a general recommendation. High utilization can signal financial distress, negatively affecting your score.
Length of Credit History
A longer credit history typically contributes positively to your credit score. Lenders prefer to see a reliable record of managing credit over time.
Types of Credit Accounts
Diverse credit accounts—such as credit cards, installment loans, and mortgages—help improve your score. Lenders view this diversity as a sign of financial stability.
Recent Credit Inquiries
When you apply for credit, a hard inquiry occurs. Too many inquiries in a short time can lower your score. This is particularly concerning if you are perceived as a borrower seeking excessive credit.
Strategies for Improving Your Credit
Top Tips for Raising Your Score
- Pay Bills on Time: Timely payments are essential.
- Reduce Debt Levels: Focus on paying down existing debt.
- Keep Old Accounts Open: This can improve your credit history length.
Debt Management Techniques
Consider developing a debt management plan. Professional help is available through credit counseling services if needed. Prioritize paying high-interest debts first.
Importance of Regular Credit Report Checks
Regularly checking your credit report helps you monitor your progress and catch inaccuracies. Under U.S. law, you can access one free report each year from each of the three major credit bureaus.
How to Deal with Negative Items on Your Report
Negative items can be disputed. If inaccurate, contact the credit bureau to fix them. Also, consider requesting goodwill adjustments from creditors.
Personalized Recommendations for Financial Products
Overview of Recommended Credit Cards
Look for credit cards that cater to those rebuilding credit. Options such as Capital One Secured Mastercard or Discover it Secured Credit Card can be suitable choices.
Best Loans for Different Financial Situations
Various loans suit different financial situations. For instance, personal loans may help consolidate debt, while secured loans might provide lower interest rates.
How to Choose the Right Financial Product
When selecting financial products, assess your needs, interest rates, and fees. Understanding these factors ensures you choose a product aligned with your goals.
Tools for Comparing Offers
Utilize websites like Credit Karma or NerdWallet for comparing different credit offers. These tools provide comprehensive insights that can aid in decision-making.
Tax Preparation and Filing Insights
Importance of Tax Compliance for Credit
Being compliant with tax obligations contributes to your overall financial health. Issues like unpaid taxes can lead to liabilities affecting your credit.
Tips for Efficient Tax Preparation
Start early and keep records. Use tax preparation software or consult professionals if your situation is complex.
Understanding Deductions and Credits
Understanding available deductions and credits can minimize taxable income, freeing up cash for debt payments.
Common Tax Mistakes to Avoid
Avoid failing to report income, missing deadlines, and neglecting documentation. Errors can lead to audits or fines.
Being proactive about your credit score can open doors to better financial opportunities.
By following these detailed steps and ensuring you understand these crucial concepts, you can work towards restoring your credit score after late payments, ultimately leading to a healthier financial future.
Understanding Credit Scores
Understanding your credit score is critical when you aim to fix it after late payments. A credit score reflects your creditworthiness, influencing major financial decisions such as loan approvals, interest rates, and even finding housing. Therefore, knowing how credit scores work empowers individuals to take informed actions towards rebuilding their financial health.
What is a Credit Score?
A credit score is a numerical representation of an individual's credit risk, generated by credit bureaus. This score typically ranges from 300 to 850. Higher scores indicate a lower risk to lenders, while lower scores can limit your chances of obtaining favorable credit terms.
The score is calculated based on information collected from various sources, including credit card companies and banks. This data encompasses several aspects of your financial behavior, making it essential to grasp how these numbers come to be and their implications on your financial journey.
Factors Influencing Your Credit Score
Several factors determine your credit score. Understanding these components can enlighten individuals on how to enhance their scores effectively. Here are the main factors:
Payment History
Payment history is the most significant element of your credit score, accounting for about 35%. It details whether you have paid your bills on time. Consistent late payments can severely damage your score. Staying timely with your upcoming payments can help you rebuild.
Having a solid payment history indicates reliability to lenders. A positive payment record increases your chances of credit approvals, while missed payments serve as red flags.
Credit Utilization
Credit utilization represents the amount of credit you are using relative to your total available credit, encompassing roughly 30% of your score. Keeping your utilization below 30% is generally viewed as responsible credit management. It shows that you do not excessively rely on borrowed funds.
A lower credit utilization ratio communicates financial responsibility, which is favorable for lenders. High utilization might indicate financial strain, which can negatively impact your credit assessment.
Length of Credit History
The length of your credit history contributes around 15% to your score. This factor assesses how long your accounts have been active. A lengthy history typically indicates stability and experience in managing credit.
Managing older accounts responsibly has benefits as having a well-established credit history demonstrates reliability. However, opening new accounts can harm this length if older accounts are neglected.
Types of Credit
Types of credit account for about 10% of your score and refer to the various credit accounts you possess, such as revolving credit (credit cards) and installment credit (loans). A diverse portfolio can reflect positively on your financial reliability.
This diversity shows that you can handle different types of credit responsibly, which lenders favor. However, only diversifying for the sake of it can backfire if it leads to taking on more credit than you can manage.
Recent Inquiries
Recent inquiries can affect about 10% of your score. This reflects how many times you have applied for credit in the past few months. Frequent credit applications can be a warning sign to lenders, indicating potential risk.
Limit your applications when trying to maintain a healthy score. Each hard inquiry can lower your score slightly, and too many in a short time can suggest financial distress.
Understanding these factors will help you recognize where to focus your efforts when trying to improve your credit score.
Key Point: A credit score is essential for your financial health and understanding it can lead to better management and recovery strategies.
The Impact of Late Payments on Your Credit Score
Understanding how late payments influence your credit score is critical. Late payments can cause significant damage to your credit health. This damage affects not only your credit score but also your ability to secure loans, obtain favorable interest rates, and sometimes even impact job opportunities. Knowing the mechanics of how late payments interact with credit scores empowers individuals to take control of their financial futures.
How Late Payments Affect Credit Health
When a payment is late, it is reported to the credit bureaus. This information goes into your credit report and contributes to your credit score. The impact depends on the number of days a payment is overdue. For instance, payments that are 30 days late are typically less harmful than those that are 60 or 90 days late.
- Payment History: This is the most significant factor in a credit score. Late payments can linger on your credit report for up to seven years. This long-term impact can hinder your creditworthiness.
- Credit Utilization: High credit card balances alongside late payments can intensify the negative effects. Lenders see a pattern of irresponsibility.
- New Credit Applications: A low credit score affects any new credit applications. Lenders may see you as a high-risk borrower.
Taking proactive steps to address and rectify late payments can mitigate these effects. The sooner you act, the better.
Time Frame of Impact from Late Payments
The time frame during which late payments impact credit scores varies. Generally, the consequences can be felt immediately upon late reporting. Here are some stages of the impact:
- Immediate Effect: Once a payment is 30 days late, it often translates into a noticeable decrease in your credit score.
- Long-Term Residuals: A 60-day late payment can be even more damaging. The longer the delay, the more profound the impact.
- Duration on Record: Late payments remain on your credit report for seven years. However, their influence wanes over time.
- Recovery Period: As you make timely payments after experiencing late ones, your credit health starts to bounce back. The timeline for recovery might range from a few months to a couple of years, depending on overall credit usage.
Understanding this timeline is essential for managing future payments. Knowledge is power in navigating your credit health for the best outcomes.
It's crucial to maintain good payment habits to reverse the negative trend after late payments. Every small step counts!
Assessing Your Current Credit Situation
Understanding where you stand is essential when working to improve your credit score. Assessing your current credit situation lays the foundation for potential recovery. This step involves an honest evaluation of your financial activities and existing credit health. Without this assessment, developing an effective strategy is challenging.
Obtaining Your Credit Report
The first step in assessing your credit situation is to obtain your credit report. Your credit report includes detailed information about your borrowing history, including any late payments. In the US, you are entitled to one free credit report annually from each of the major credit bureaus—Experian, TransUnion, and Equifax. Accessing these reports can give you comprehensive insights into factors impacting your credit score.
To get your report, visit AnnualCreditReport.com. This is the official site authorized by federal law. Make sure to request reports from each of the three bureaus. By reviewing all three, you can get an accurate picture and identify discrepancies that may exist across the reports.
Reviewing Report for Errors
Once you have your credit reports, the next crucial step is reviewing them for errors. Errors can appear for various reasons, including clerical mistakes or outdated information. A simple incorrect entry can significantly lower your credit score. Here are some common types of errors to look out for:
- Inaccurate personal information
- Incorrect account status
- Duplicate entries
- Accounts belonging to someone else
If you spot any inaccuracies, it's important to address them promptly. Dispute any errors with the credit bureaus. You can usually do this online, and they are obligated to investigate your claims. Fixing these mistakes can improve your credit score. It is advisable to document your disputes, keeping records of all communications.
Tip: Regularly reviewing your credit report can help catch errors before they affect your financial health.
By taking these initial steps seriously, you can accurately assess your credit situation. This forms the basis for an effective action plan to improve your credit score after late payments.
Immediate Actions to Boost Your Credit Score
Taking immediate actions is essential when aiming to improve your credit score after experiencing late payments. These steps can not only help mitigate the negative effects of past late payments but also jumpstart a healthier financial profile. Implementing these strategies can lead to noticeable improvements over time, enhancing your creditworthiness and opening doors for better financial opportunities.
Making Payments on Time Moving Forward
It is critical to establish a habit of making payments on time. This action significantly impacts your credit score, given that payment history accounts for a substantial part of your credit score calculation. To ensure you never miss a payment, consider setting up automatic payments or reminders through your bank or credit card issuer. Additionally, prioritizing essential bills like rent or mortgage can further protect your credit status. A strong commitment to timely payments will not only stabilize your current credit score but also foster positive long-term habits.
Reducing Outstanding Balances
Reducing outstanding balances is another effective strategy. High credit utilization negatively affects your credit score, as it indicates a reliance on credit. Aim to keep your credit utilization ratio below 30%. To do this, pay down existing debts and avoid accumulating more. Consider the snowball method or avalanche method to tackle your debts effectively. Furthermore, no longer using cards or accounts with high balances can be useful during this period. Reducing your outstanding debt will improve your overall credit score, demonstrating responsible credit management to potential lenders.
Improving your credit score takes time and consistency. Focus on these immediate actions to set a solid foundation.
Utilizing Credit Management Tools
In the journey to rectify a credit score after late payments, various credit management tools can serve as one’s allies. These tools not only aid in monitoring progress but also provide structured plans for credit enhancement. Utilizing these tools can simplify the complex financial landscape and improve financial habits significantly.
Credit Monitoring Services
Credit monitoring services are essential in today’s financial environment. They offer a mechanism to keep an eye on your credit report and score regularly. This holds importance as changes to your credit score may occur due to multiple factors. By staying updated, individuals can promptly address issues, such as incorrect information or sudden changes that could affect their scores negatively.
Many services notify users in real-time about any modifications to their credit report. This could include alerts about new inquiries, changes in account balances, or updates on payment history. Such information allows users to take quick action. For example, if a late payment appears unexpectedly, a user can investigate and rectify the matter swiftly, preventing long-term damage to their credit score.
Subscribers to credit monitoring services typically benefit from access to additional resources, such as credit score simulations. These simulations can provide insights on how changes in habits may influence future credit scores. Additionally, most services offer comprehensive analysis tools and personalized advice tailored to one's financial behavior, thus enhancing the effectiveness of credit recovery strategies.
Debt Management Plans
Debt management plans (DMPs) can also be a valuable resource for individuals striving to improve their credit scores after late payments. A DMP is a structured program designed to assist users in managing their debts more effectively. It typically involves working with a credit counseling service, which strategizes on behalf of the individual.
The basics of a DMP include consolidating various debts into one monthly payment, often at a lower interest rate. This can minimize financial strain and help ensure payments are made on time. Adhering to a DMP can show creditors a commitment to paying down debt, potentially leading to positive adjustments in credit reports over time.
However, it is essential to consider factors before entering a DMP. Establishing a DMP may impact one’s credit score initially since it involves closing existing accounts. Nonetheless, as individuals demonstrate consistent, timely payments under the plan, positive effects on their credit scores can emerge. It is crucial to evaluate one's financial situation thoroughly, ensuring that the structured debts under a DMP can be accommodated within one’s budget.
In summary, leveraging credit management tools like credit monitoring services and debt management plans can provide substantial benefits. They offer support, structure, and insight, fostering better financial habits. By employing these tools, individuals can create a proactive strategy for addressing past mistakes and improving their creditworthiness over time.
Long-Term Strategies for Credit Improvement
Long-term strategies for credit improvement are crucial for anyone looking to rehabilitate their credit score after late payments. While immediate actions can boost scores rapidly, sustainable credit health relies on consistent habits and planning. Establishing a budget and building an emergency fund are two essential components that will not only help improve credit scores but also create a solid financial future.
Establishing a Budget
Creating a budget is a practical and necessary step to managing finances effectively. A well-structured budget allows you to monitor where your money goes, prioritize essential expenses, and allocate funds for savings and debt repayment. This can prevent future late payments and keep your credit intact.
Key Steps in Establishing a Budget:
- Track Income and Expenses: Understand your total earnings and identify fixed and variable expenses. This clarity will help in making informed decisions about where to cut back.
- Identify Needs vs. Wants: Distinguishing between essential spending and discretionary purchases can result in better priority-setting. This helps to ensure necessary bills are paid on time.
- Set Financial Goals: Define clear short-term and long-term financial objectives, such as saving for emergencies or reducing credit card debt. These goals provide motivation to stick to the budget.
By keeping a close eye on spending and adjusting accordingly, individuals can avoid financial pitfalls. Moreover, regular reviews of the budget will ensure it stays relevant with changing financial situations.
Building an Emergency Fund
An emergency fund is a financial safety net designed to cover unexpected expenses, such as medical emergencies, car repairs, or loss of employment. Having accessible funds readily available not only provides security but serves as a safeguard against accruing debt when unavoidable expenses arise.
Benefits of Building an Emergency Fund:
- Reduces Financial Stress: Knowing you have funds to cover emergencies can alleviate anxiety, allowing for clearer thinking in financial decision-making.
- Prevents Future Debt: Access to emergency savings minimizes the need for high-interest loans or credit card usage during tough times.
- Supports Credit Score Recovery: An emergency fund can help maintain timely payments during financial hardships, which is essential for improving credit scores over time.
To build an emergency fund, aim to save at least three to six months’ worth of living expenses. This may seem daunting, but consistent and gradual saving can make it achievable. Start with small, regular contributions to a separate savings account. Over time, this fund can grow, providing peace of mind and financial stability.
Understanding the Time Required for Credit Recovery
Understanding the time required for credit recovery is essential in the process of repairing your credit score after late payments. Often, individuals believe that improvements can occur overnight. This misconception can lead to frustration and disappointment. The reality is that rebuilding your credit score takes time and deliberate effort.
The length of time needed for credit recovery can vary widely among individuals. Several factors influence this duration, such as the frequency and severity of late payments, the overall credit profile, and the steps taken to improve financial habits. By grasping the timeline involved, you can set realistic expectations and develop a structured plan to boost your credit score. This understanding helps in maintaining motivation, as tangible progress may take weeks or even months to become evident.
How Long to See Improvements
It typically takes several months to notice improvements in your credit score after making changes to your financial behavior. Once you initiate positive actions—like making on-time payments and reducing outstanding balances—your credit report begins to reflect these changes. However, the timeline may look different based on your unique circumstances.
For example, when late payments are removed or more recent payments are made on time, positive impacts generally show within 30 days. According to credit experts, the following guidelines can offer a general sense of when improvements may occur:
- One to three months: Initial improvements can show during this period by positively impacting your credit utilization ratio and recent payment history.
- Three to six months: As you establish a pattern of timely payments, the credit score may begin to reflect ongoing responsible habits genuinely.
- Six months and beyond: For more significant improvements, such as increased score thresholds or removal of negative marks, be patient. It can take longer to reach higher credit score levels, particularly if you had multiple missed payments in the past.
Milestones in Credit Recovery
Setting milestones during the credit recovery process serves as helpful checkpoints to track progress. Recognizing these milestones can empower and motivate you as you navigate the challenging journey of restoring your credit score.
Some notable milestones to aim for include:
- Improvement in Payment History: Consistently making on-time payments for six months can significantly boost your score.
- Reduction in Credit Utilization: Aim to keep your credit utilization below 30% of your available credit limit. Accountability in managing balances will reflect positively over time.
- Establishing New Credit Accounts: If your credit history is thin, responsibly opening a new credit account—like a secured credit card—can enhance your score but should only be done with caution.
- Reviewing Your Credit Report: After six months, conduct a comprehensive review of your credit report. Look for positive changes, such as improved score and removed inaccuracies.
Effective planning combined with realistic expectations can turn the complex task of credit recovery into a structured journey. Remember, it’s not just about the credit score but also about building sustainable financial habits moving forward.
Learning from Past Mistakes
Understanding your past financial decisions is an integral step in the journey to repairing your credit score. Acknowledging previous mistakes, particularly concerning late payments, can lead you to a more responsible financial future. Analyzing past behaviors promotes awareness and enables you to identify recurring patterns that may have contributed to your current credit standing. A commitment to learning from these mistakes fosters a proactive approach to managing credit, ensuring that future missteps are minimized.
Reviewing Payment History
Your payment history is a crucial component of your credit score. It reflects how consistently you have made payments on time. By examining your payment record, you can pinpoint late payments, missed deadlines, or any drastic changes in your financial situation. This review should include all accounts listed on your credit report, such as credit cards, mortgages, and loans.
- Identify Late Payments: Look for any accounts that have recorded late or missed payments. Knowing how many late payments you have and their severity—such as whether they were 30, 60, or 90 days late—is essential.
- Check for Errors: Sometimes your payment record may contain inaccuracies due to clerical errors. Disputing errors promptly can improve your score significantly.
- Understand Patterns: If you observe patterns in your payment history, such as consistently late payments on a particular account, it is a sign to take action. Assess whether your financial habits or account management need improvement.
Making these reviews regular practice not only enhances your understanding of your credit health but allows you to control factors that influence your score.
“Regularly examining your payment history can help you identify issues before they escalate.”
Adjusting Financial Habits
Changing your financial habits is essential in the pursuit of better credit. This does not only mean making timely payments; it encompasses a broader approach to how you manage your finances.
- Budgeting Effectively: Creating a detailed budget helps you understand where your money goes monthly. Allocating funds to ensure bills are paid promptly is critical.
- Avoiding Unnecessary Debt: Using credit cards responsibly is necessary. Aim to charge only what you can pay off each month, preventing debt accumulation.
- Setting Up Payment Reminders: Utilize technology to your advantage. Setting reminders for payment due dates can reduce the chances of late payments.
- Building a Safety Net: Establish an emergency fund to handle unexpected expenses which could interfere with timely payments.
Adjusting financial habits requires commitment, but the benefits extend beyond a better credit score. They lead to overall financial wellness and security, fostering a healthier relationship with money long term.
Seeking Professional Assistance
Improving your credit score after late payments can be challenging. Seeking professional assistance can be a crucial step in this journey. Professionals provide valuable insights, structured plans, and tools tailored to individual situations. They offer experience and knowledge which could lead to faster results than what one might achieve alone.
Many individuals lack the expertise needed to navigate the complex landscape of credit management. Credit professionals assist in understanding credit reports and identifying errors that could affect one's credit score. Furthermore, they can help set realistic goals and create practical strategies to reach them.
Credit Counselors and Financial Advisors
Credit counselors and financial advisors serve as invaluable resources when managing credit issues. They specialize in providing personalized advice to improve credit scores. Credit counselors often work with clients on debt management plans. These plans can help clients manage their payments more effectively. They can also negotiate with creditors on behalf of the client, potentially leading to lower interest rates or manageable repayment terms.
When looking for credit counselors, it is essential to seek those who are accredited. Organizations like the National Foundation for Credit Counseling verify the qualifications of these professionals. Proper accreditation ensures that the counselor follows ethical practices and is knowledgeable in relevant laws and regulations.
Financial advisors, while also useful, have a broader focus. They help with overall financial health, including investments and long-term planning. They can help clients understand how overdue payments have impacted their overall financial picture. Together with a financial advisor's advice, you can establish better financial habits and structures that support your credit recovery goals.
Navigating Credit Repair Services
Credit repair services can seem attractive, as they promise quick fixes to credit issues. However, caution is advised. Not all services are legitimate. Before engaging a credit repair service, assess its reputation and check for reviews from previous clients. The Federal Trade Commission warns against services that require upfront payment without delivering a clear benefit.
Some legitimate credit repair companies can assist in disputing errors on credit reports. They streamline the process and often have more experience dealing with credit bureaus. Understanding your rights is essential while navigating this terrain. The Fair Credit Reporting Act protects consumers regarding the accuracy and privacy of their credit information.
Working with credit repair services should complement your efforts rather than replace them. Personal responsibility in managing debts and payments remains crucial. Use these services as part of a broader strategy that includes timely payments and informed financial habits.
"Professional assistance can act as a guide to unraveling the complexities of credit management."
Monitoring Progress and Adjusting Strategies
Monitoring your credit score effectively is a vital component of managing your financial health, especially after experiencing late payments. It allows you to evaluate the effectiveness of the steps you take in improving your credit score. The tendency is often to forge ahead with different strategies, but without analyzing their outcomes, it can lead to ineffective actions. This section emphasizes the significance of keeping track of your credit score and adjusting your strategies as needed.
Regularly Checking Credit Scores
Regularly checking your credit score should be a non-negotiable part of your financial routine after late payments. Many credit reporting agencies provide free access to your credit score, so take advantage of these resources. Knowing your current standing enables you to identify trends over time. If you notice an upward trend, it suggests that your strategies are working. However, if the score remains stagnant or decreases, reassess your actions.
Here are the benefits of regularly checking:
- Awareness of Changes: You can quickly spot any errors or unexpected changes in your credit information.
- Motivation: Seeing incremental improvements can serve as motivation to keep going.
- Timely Adjustments: If a strategy is not bringing about the desired outcome, you can change course sooner rather than later.
It is essential to stay informed about your credit score to manage your financial journey effectively.
Some recommendations for setting up a regular checking routine include:
- Mark a date on your calendar monthly to check your score.
- Use credit monitoring services for real-time updates.
- Request a free annual credit report from agencies to gain comprehensive insight.
Adapting to Changes in Financial Situation
Financial situations can change, and so can your credit management strategies. Whether you have experienced a change in income, incurred new debts, or made significant financial investments, adjusting your strategies can be crucial to maintaining or improving your credit score.
- Assess Your New Situation: When financial changes occur, re-evaluate your budget and priorities. For instance, if your income has decreased, you may need to prioritize urgent payments to avoid further late payments.
- Modify Payment Strategies: In times of financial difficulties, consider contacting creditors to discuss your options. They may offer flexibility, such as extended payment deadlines or reduced fees.
- Adjust Saving Goals: If you’re gaining extra income or settling debts, it might be wise to create or tweak savings goals to focus on building an emergency fund. Knowing you have luxury in finances can help mitigate the risk of late payments.