What is a Slow Pay? |
By Jessica Malitoris on January 26, 2011
.jpg.aspx?width=75&height=75) A “slow pay” is exactly what its name suggests it is: a bill you paid too slowly, that is, a payment the creditor received later than the due date. A slow pay can happen with credit cards bills, mortgage payments, or even goods and services which require payments made over time (such as website hosting companies). If your bill is paid less than 30 days late, only the company you paid money to can view that information.
However, as soon as your payment is 30 days late, that fact goes into your credit file. The Fair Isaac Corporation, the developers of the most common credit-scoring system, revealed that for those with a credit score of 680, it can lower their score by 60 to 80 points, while those with a score of 780 will find an even more significant decrease of 90 to 110 points. Even worse, the longer you wait to pay your bill, the more your credit score drops. Unfortunately, small mistakes such as a slow pay can remain on your credit file for seven years.
For small businesses and entrepreneurs, slow payments can make staying in business a lot harder. When accepting new clients, taking simple steps such as checking up on a person’s credit score and laying out clear payment guidelines in the contract can reduce the chance that you will end up with a customer who consistently pays slowly. Creating incentives for customers to pay on time can help both sides win.
Slow payments can have a huge impact on your credit score, and are fairly easy to avoid. Keep in mind that slow payments go in your credit file once the payment is 30 days late, but making those payments on-time—or within a month of on-time—helps both you and the person or business you owe money to.
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