Basics of Building Good Credit: Pay Your Bills on Time
Anyone who has ever applied for a credit card, applied for a bank loan, bought a house, or purchased a car knows one thing: good credit is important. Now, there are many factors that weigh in to determine your credit score. Your used credit to available credit, you delinquencies, and the amount of outstanding debt you have can all play a role in your credit score. But, so can little things, such as paying your bills late.
Paying your bills on time is one of the easiest and most important ways to keep your credit score where you want it: high. In order to do this, consider the following:
Never Pay More than 30 Days Late: Chances are, you’ve probably missed a bill payment. The date evades you and you simply forget when something is due. Well, don’t sweat it…at least not until you are thirty days late. Normally, being a day or two late on a bill won’t hurt your credit score. It may add expensive fees, but credit agencies are usually only notified of your late payment when the payment is more than 30 days late. For this reason, even if you are a few days late, pay your bill as soon as possible. Don’t let it get out of hand.
Don’t Assume You Have to Get a Statement to Owe Money: Many people erroneously assume that if they don’t get a bill or a monthly statement, they don’t owe any money. This is wrong. Mail can get lost, stolen or misplaced. Just because you haven’t received a bill, you may still be responsible for a payment.
Use Automatic Payments: One of the easiest ways to pay your bills on time is to set up automatic payments. Most cell phone companies, utility companies, and credit card companies offer automatic payment, where you simply choose a day each month that your bill is paid electronically.
However, be careful with automatic payments: you might not want to set them up for every bill you have. Some companies, workout facilities like your gym, are known for continuing to withdraw money from your bank account even after your have canceled your gym membership.
Use Your Credit Card: For some people, the concept of automatic payments is met with skepticism: some people don’t like the idea of creditors having access to their checking account. If you fall into this category, try setting up automatic payments that are paid through your credit card. However, be careful with this: only go this route if you can pay off your credit card each month.
Write it Down: Another great way to keep track of bill due dates, particularly when you have quite a bit of bills, is to write it down. Whether you use a wall calendar or a computer, set up tips to remind yourself when - and what - bills are due each week. Many companies will even do this for you if you sign up for email reminders.
Pay Your Bills as They Come: One way to assure that you will never have a late payment is to pay your bills as soon as they come in. Once you receive them electronically or physically, sit down and pay them immediately. This will keep you from forgetting them or putting them off until the due date has passed.
Pay Your Bills Online: These days, most people pay at least some, if not all, of their bills online. Paying online is easy, fast, and saves you money on postage stamps. If you haven’t gotten on the “pay online” bandwagon, consider doing so.
Good credit is important for many aspects of your life: it opens up a plethora of opportunities for you. This makes paying your bills on time also important. As much as 30% of your credit score can be dictated by bill payments. Take the above steps to make sure you stay on top of your bills and on top of the credit spectrum.