Families fail to pay bills for all sorts of reasons, such as willfully avoiding payment, being short on cash or simply forgetting to pay. It's never a good idea to forego paying bills, however. Doing so can hurt your credit rating and make it harder for you to get the services you need.
Late Payment Penalties
If you miss bill payments or make late payments, your creditors might impose late payment penalties. Failing to pay bills can cause you to rack up fees and quickly increase the total amount that you owe.
Bills and Your Credit Score
Your credit score is the number lenders use to help judge whether to give you loans and credit. According to the Fair Isaac Corporation, about 35 percent of your total credit score is derived from your debt payment history. A history of late and missed bill payments is a major strike against your credit score. A poor credit score can make it difficult for you to get loans, and the loans you do get are likely to have higher interest rates.
Access to Utilities and Services
If you fail to pay bills long enough, the companies you owe can cut you off from vital services. For example, if you don't pay your electric bill, the energy company might shut off your power. If you don't pay your cell phone bill or cable bill, your service providers might terminate your data access.
Foreclosure and Repossession
A home mortgage is considered a secured debt, because the value of the home acts as collateral for the loan. This means that the lender can foreclose on your home, kick you out, and sell it off to a new buyer if you don't pay your bills. Similarly, if you get a loan for property like a car, boat or large machinery, the lender might be able to repossess or take ownership of the property if you fail to pay your bills.
If you neglect to pay your bills long enough, your creditors might send debt collectors after you who can bring lawsuits against you to collect debts. If a court enters a judgement against you, you could be subject to wage garnishment. Under wage garnishment, your employer has to withhold a portion of your pay and give it to your creditors.
- Fair Isaac Corporation: What’s in your FICO Score
- Fair Isaac Corporation: How to Repair Your Credit and Improve Your FICO Credit Score
- MSN Money: Paying your bills: Which to pay first
- Banrkate: Paying your Bills: Which to Pay First
- IRS: Foreclosures and Repossessions
- Federal Trade Commission: Debt Collection FAQs: A Guide for Consumers
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