What can be done to make your credit better and how to stop their credit from going bad in the first place.
Paying Credit Card Bills on Time
The answer is almost always the same: Pay your bills on time. Specifically things like credit cards, auto loans, mortgages, etc., accounts that show up on your credit report.
Paying your electric bill 3 days late won’t hurt your credit. Paying your credit card bill 95 days late will annihilate your credit.
When you just cannot make a minimum payment for whatever reason, it helps to call your creditor before the due date and explain the situation. Most of the time, they will be able to work with you to setup something to make it easier for you to pay.
One 30 day late payment won’t shave 100 points off of your credit score but it certainly doesn’t help. Doing what you can do avoid making these late payments is critical if you want to have good credit.
I know it can be frustrating to sometimes be told “It takes time for some credit wounds to heal” but it’s the truth. It’s harder to take late payments off of your credit report than it is to take off a collection account.
About 18 months after a late payment, assuming you’ve been making all of your other payments on time, most of the effect it had on your credit will wear off.
Average age of your accounts, credit utilization, inquiries, everything like that play a role in your credit score but your payment history plays the biggest role, which can’t easily be changed.
Method to Pay Bills on Time
“Lazy Bill System” for the employed:
- Acquire one month’s worth of expenses, move to checking account.
- Set employer direct deposit to this checking account. Set everything to autopay from this checking account (edit: or a credit card if it doesn’t charge a convenience fee). (Autopay in full if it’s a credit card, unless you’re playing catch-up.)
- Use something like Mint or YNAB to track your expenses from your checking, credit cards, etc. so you can balance your finances automatically.
- You are now done.