Finding out how to boost your credit score before making a significant purchase, such as a home or car, is a wise choice. The less expensive it will be for you to borrow money to make that purchase, the better your credit score.
While credit scoring companies consider a number of variables when assessing your credit history, your credit payment history is the most crucial one. Consistently paying your bills on time is the best way to raise your credit score.
According to MyFico, the consumer website of the most popular credit scoring company in the United States, the history of bill payments makes up 35% of a FICO score. The typical range of FICO scores is 300 to 850 points. 760 or higher is considered an excellent rating, which entitles you to the best loan rates. According to this Credit.com article, even one late payment to a creditor can lower a good credit score by more than 100 points.
Payment History Analysis
Credit scorers examine accounts from major card issuers like Visa, Mastercard, American Express, and Discover as well as retail store accounts, installment loans, finance company accounts, and mortgage loans when evaluating your payment history.
The score you receive for your history of paying your bills depends on a number of factors, just like it does for your overall credit score. FICO, for instance, requests information about the length of any late payments you may have made. Being late for 30 days won’t have as much of an impact as being late for three months or longer. The total number of missed payments you’ve had, the amount you owed your creditors at the time, and the time since the most recent missed payment are additional factors.
The greater the negative impact on your credit score, the more recent the missed or late payment was. After seven years, credit reporting agencies automatically remove late payments from their files.
A helpful tool is easy access to your FICO score. This access is available to KeyBank consumer credit card holders as a perk of online and mobile banking.
Avoiding a Poor Score
Making and adhering to a budget that places credit payments above discretionary spending like going out to eat or buying new clothes is one way to prevent having your credit score penalized for late payments. Adding all of your payment due dates to your calendar, whether it be digital or traditional paper, may also be helpful. Set up automatic bill payment to help you avoid damaging your credit due to a moment of forgetfulness. Bill Pay allows you to schedule and monitor payments.
There are steps you can take if you’re having trouble paying your bills in order to lessen the impact on your credit score and buy some time to get your money management back on track. Most credit card companies offer hardship programs that will give customers a break when they lose their job, have unexpected medical expenses, or run into other financial difficulties. These programs typically take the form of adjusted due dates, lowered interest rates, or waived fees. But if you want this assistance, you must reach out to them in advance. They might not be as accommodating once you fall behind by three months or more.
A certified credit counselor can provide free or affordable assistance to help you develop a strategy to pay off your past-due bills as soon as possible. Finding a credit counselor is made easier by this Federal Trade Commission guide.
Your credit score will suffer greatly if you don’t pay your bills on time. The good news is that even if you have a history of a few late payments, you can still gain points by paying your bills on time in the future.