By now, there are few consumers who don’t realize how important good credit is. Most people know that they need to have good credit. What’s in a credit report can influence money-related decisions from whether or not you get a loan to whether or not you are hired for a job.
Your credit is so important that it’s vital that you don’t overlook it. So, what can you do to boost your credit or even establish credit? The best thing you can do is make all your bill payments on time.
On-Time Credit Card Payments are Reported to the Bureaus
Each of the three major credit bureaus collect information on your credit habits. When you open a credit account, it is reported to the bureaus, along with information about how high the credit limit is.
Once you start using your credit — especially credit cards — your balance is tracked. The credit bureaus know (thanks to information provided to them by your creditors) where you live and how to contact you. Not only that, but each credit card payment you make is reported to the bureaus.
This is one of the reasons that many consumers start out with credit cards; they are easy to get and the constant reporting means that you have a chance to build your credit faster. In fact, many credit card issuers report your balance and payment information once each month. This allows you to create a positive payment history, showing that you are reliable and that you make your payments on time and in full each month.
Because of these frequent reports, credit reports are often up to the minute.
The Other Side: Missed Payments Can Swing Your Score Lower
Of course, dealing with credit can sometimes be a two-edged sword. If you are late making a payment, or if you don’t pay the entire minimum, your less than responsible behavior will be noted, and you might find yourself with a lower credit score than you want.
It’s also worth noting that missed payments impacting your score aren’t restricted to credit issuers. Even non-credit accounts can affect your credit score when you don’t pay on time and in full. Your unpaid utility account might be sent to collections. Your landlord might be tired of your late payments, and decide to report to a credit bureau. Positive payment behaviors when it comes to non-credit bills won’t help your credit score improve. However, negative payment items from these non-credit bills can — and will — drag your credit score down.
Since your payment history is the most important part of your credit score (FICO lists it as accounting for 35 percent of your score), you need to pay attention to it. Bolster it with types of credit that allow you to make monthly payments. Set up automatic transfers or withdrawals so that you don’t forget. This way, you’ll be able to build a good credit history.
When fixing your credit, the first thing to do is make sure that you are making all of your payments on time. That way, you make a favorable impression on lenders, and they are more willing to take a risk on you.