How to mend your credit score if you’re behind on bills
Credit scores, based on information in credit reports, are a measure of a borrower’s credit health. Youmay qualify for a loan with a credit score in the 600s, but an excellent score of about 750 or higher positions you to get the best terms.
Payment history is the most influential factor in your credit score. If you’re late by 30 days or more on a debt payment and have no accommodation from the lender, your credit score will take a blowfromthe delinquency on your credit report. Or if youmiss several payments for bills with another company that doesn’t typically report payment history directly to the credit bureaus, such as a cell phone or utility service, the account may be sent to collection— and that likely will showon your credit report and harm your score significantly.
The total impact of delinquencies depends on three main factors, saysTom Quinn, vice president of scores for FICO. One is the severity of the delinquency— missing a payment by 90 days is more damaging than being 30 days overdue, for example. Howoften you have paid late is a factor, too; a pattern of missed payments on multiple accounts is detrimental to your score. And the more recently you skipped a payment, the more it hurts your score. As time passes, the delinquency becomes less harmful.
To start rehabilitating your score, catch up on missed payments as soon as possible andmake on-time payments going forward.
On a credit card, paying theminimum amount due avoids a delinquency, though you’ll pay interest on the balance you carry frommonth to month. If the minimum isn’t manageable, ask your issuer whether it will lower the amount, allowyou to defer a few payments or otherwise modify the terms until you’re in a better financial position. Signing up for automatic payments helps ensure that you’ll be on time, too.
You can also explore otherways to add positive payment information to your credit reports. For example, you can connect Experian Boost (www.experian.com/boost) to your bank account and allowit to add positive information about your payment history for utility and cell-phone bills— and even for yourNetflix subscription— to your Experian credit report. Experian says that on average, Boost users increase their FICO score (as calculated with Experian report data) by 13 points. Keep in mind that Boost information won’t appear on your reports from Equifax orTransUnion or affect your scores based on those reports.
Free credit scores are easy to come by these days, so you shouldn’t have any trouble tracking yours. Your bank or credit card issuer may provide you with regular score updates. Or you can use a service such as Credit Karma, which offersVantageScore credit scores from your Equifax and TransUnion reports, or Experian’s FreeCreditScore.com, which provides a FICO score based on Experian report data.