How One Missed Bill Becomes One Costly Mistake

I’m about to do something that I rarely do.  Admit that I made a mistake.  I’ve lamented before about how credit scores can be a notoriously fickle thing and can begin to drop rapidly if you start missing payments.  With a slight bit of shame, I’m about to give you a personal case study in how a missed bill affected my credit score and how that in turn cost me a big wad of cash.

I have a credit score right around 800.  All of my bills get paid in full and on time every month.  Like most people, I sign up for automatic payment so it’s one less thing that I have to worry about.  I have one credit card bill that currently doesn’t allow for automatic payment so I have to go online to pay the bill manually every month.

Credit score

It turns out we didn’t have our e-mail address on file either so we didn’t get the benefit of an e-mail notice telling us that we had forgotten to pay our bill.  Before I knew it, this bill was 60 days past due and the credit agency had been notified.

The timing of this was especially bad because we were applying for a mortgage refinance at the time.  One of the first things that the bank did when we applied for the refinance was to pull our credit file so imagine our surprise when they came back and told us that our credit score was 730 – a full 70 point drop.  The top reason given for the score was recent delinquent payment.

The 70 point drop in and of itself probably wouldn’t have bothered me that much had we not been in the process of applying for a loan where we needed a high credit score.  At the rate we were applying (a 10 year fixed loan at a rate of 3.25%) with our prior credit score we were looking at a closing cost that we were quite comfortable with.  But our old credit score was a thing of the past and with it went our expected closing costs.  When the bank reran our application considering our updated credit score, we found that our closing costs would be about $700 more than we had originally estimated.

A 70 point drop in our credit score and an estimated $700 more in closing costs for our refinance.  All because of one missed bill that was completely by accident.  The funny thing is that the bill was for a credit card that we rarely use.  I think the total bill was only somewhere around $100.

I think the lesson here is obvious.  I need to pay closer attention to my bills.  Automatic bill payment is a great thing but even with that I need to keep an eye on my bank account to make sure that the bills are getting paid.  The ones that aren’t on automatic payment need to be monitored even closer so something doesn’t slip through the cracks again in the future.  E-mail reminders, calendars or even post-it notes would help make sure I don’t miss another bill in the future (read more on how to improve your credit score)

Consider it a lesson learned.

Photo credit: Marcus Metropolis

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

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