If you don’t pay in that 30-day window, the creditor can report your account delinquent. That negative mark on your credit report will badly damage your score, and only time will undo the damage. It will stay on your credit report for about seven years, although the effect fades over those years. Siegel advises getting in touch with creditors and explaining what happened, when you will be back on your feet and how you plan to repay them. They may be willing to give you more time, and you may be able to prevent damage from a late payment or negotiate a lower interest rate, he says. And asking can’t hurt. WHEN MONEY IS ON THE WAY Siegel, the father of five young adults, cautions against an over-reliance on credit. But he’s willing to make an exception for when income is imminent but bills are already here. A tax refund or payment for freelance work falls into this category. If you know money is coming, credit can be a bridge until it arrives. Be prepared for a score ding as long as you are running a high credit card balance, then look for a rebound as you get it back down. WHEN STARTING OR INVESTING IN A BUSINESS Investing in a business is another time you may choose to use your credit, but keep the risks in mind. Siegel says that there should be a clear, detailed business plan that's much more specific than a great idea. A good or excellent credit score might mean you qualify for an introductory 0% rate on a credit card. Or, you may have plenty of room on your existing credit cards to temporarily run a higher balance than you do normally. “That could be a scenario that makes sense as long as you have a plan and the ability to know when it's time to stop this — this isn't working (as) I envisioned it,” says Tom Quinn, vice president of FICO Scores, a credit scoring and data company. It can be tempting to go all-in, but don’t let a business idea threaten your overall financial health.

The article When It’s OK to Let Your Good Credit Score Drop was originally written by NerdWallet on August 12, 2021, and published by The Associated Press.

BEV O'SHEA is a writer at NerdWallet.


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