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How Unpaid Bills Affect Your Credit Health

Life throws us plenty of unexpected curveballs. Sometimes these can put us in situations where we’re not able to pay a credit card bill or a student loan payment. Whatever the case may be, it’s important to know how these things can affect your credit.

How Much it Costs Not to Pay a Bill

When a bill goes unpaid, it can end up costing you more than just the bill itself. Companies can add things like late fees or collection fees, which adds to what you owe and will end up hurting your credit. Unpaid bills may not go to Collections immediately, but may end up there eventually. Collection items can follow you and can stay on your credit report for up to seven years or more.

Short-Term Effects

No matter what kind of bill is unpaid, the short-term effects to your credit can include:

  • Drop in credit score
  • Additional fees (late fees, repossession fees, and collection costs) added to the amount you owe
  • Lower chances of refinancing other loans or making new purchases in the near future
  • Having to provide more money up front for down payments or deposits

Long-Term Effects

Long-term effects to your credit from an unpaid bill can include:

  • Difficulty in increasing or improving credit score: unpaid items can outweigh the positive effect of on-time payments and other stuff that bumps up your credit score
  • Interest can continue to build up on unpaid loan balances
  • Making it harder to get future loans
  • Higher interest rates on future loans

Specific Bill Effects

In addition to these short- and long-term effects, specific unpaid bills may have additional consequences.

Utility Bills: Unpaid utility bills can make it harder to set up new services when you move. Most of the time, the unpaid amount must be paid prior to setting up new services. Occasionally, companies may require a monetary deposit up front if your credit includes unpaid utility bills.

Auto Loans: Not paying your car loan over time may eventually result in one of two kinds of vehicle repossessions. These can be voluntary (you choose to give the car back) or involuntary (the lender takes the car back), and both can have negative and lasting effects. A voluntary repossession will often have lower fees for repossession costs, and occasionally can be viewed a little differently when it comes to a credit report. Lenders can be more willing to work with you knowing that you gave a vehicle up, rather than hiding it, or continuing to use the car while being months behind. Higher costs can be added to a repossession if the lender needs to spend time searching for a person or vehicle, and you could be responsible to for those fees.

Phone Bills: Unpaid phones can make it difficult to switch carriers or get set up with a lower-cost plan.

Student Loans: Defaulting on student loans can have negative consequences similar to other unpaid bills and make it harder to get future loans. Depending on the type of loan, you won’t be eligible to defer payments and sometimes lose the option of choosing a payment plan.

Mortgage Payments:Falling behind on a mortgage loan can lead to foreclosure. It also limits your future mortgage options. Some lenders have mortgages available that require zero past delinquency on home loans. Others require a certain amount of time to pass before allowing a new home loan. Talk with a mortgage lending specialist about your situation to find out more.

Rent Payments: Failing to pay rent on time can result in late fees, as well as eviction. Many rental agencies require a credit check and often obtain references from a previous landlord.

Read up about other ways unpaid debts can affect you.

How to Handle Negative Items on Your Credit

The first step is to look at your credit report. You can find out what is on your credit report by requesting a copy directly from the three credit bureaus: Transunion, Equifax, and Experian. You can also get a free report at

Once you can verify if you have a collection item reporting, then you can take steps to pay those items. Paying collection items that are reporting to credit agencies is a great way to remove them from your credit report. Many lenders and companies will set up a payment plan to give you a starting point. If you can pay items off with a larger lump sum at one time, that works, too.

When you’ve paid something off, check your credit report again to make sure it’s been removed. It can take an average of 30-60 days for credit reports to update.

Get Help with Your Loans

For current members struggling with financial hardship, you can reach out to our Member Solutions Department for help with your current NWCU loans. We want to help you succeed and have tools to make that happen. We can help to change your monthly due date on some loans, and offer other helpful solutions, like skipping a payment.

Talk to someone as soon as you see that you might not be able to continue to afford a car or other increasing expenses. Waiting until the last minute will limit your options. This includes your utility company, your loan lender, etc.

Get Your Credit Back on Track

While NWCU is not a credit counseling service, we partner with BALANCE to offer their services to our members for free. BALANCE has a lot of helpful information on budgeting, cleaning up credit, and handling unpaid bills—they can even connect you with a credit or debt counselor! See the options you have as a NWCU member.

When taking out new loans, make sure you’re able to add the payments to your monthly expenses. You can use our payment calculators to help. If you can afford to add a payment protection plan to your loan, consider it--this can help make sure you’re covered if an unforeseen disaster happens. Planning for the future is important to financial success.

We want to help you make informed decisions when it comes to your financial future. Visit a local branch today for a free financial check-in or give us a call at (800) 452-9515.