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 fromthe lender, your credit score will take a blowfromthe delinquency on your credit report. Or if youmiss several payments for billswith another company that doesn’t typically report payment history directly to the credit bureaus, such as a cellphone 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, saysTomQuinn, 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. How often 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, themore it hurts your score. As time passes, the delinquency becomes less harmful.
To start rehabilitating your score, catch up onmissed payments as soon as possible and make on-time payments going forward.
On a credit card, paying the minimum amount due avoids a delinquency, though you’ll pay interest on the balance you carry frommonth tomonth. 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 other ways 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 cellphone 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 informationwon’t appear on your reports fromEquifax or TransUnion 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 issuermay provide youwith regular score updates. Or you can use a service such as Credit Karma, which offersVantageScore credit scores fromyour Equifax andTransUnion reports, or Experian’s FreeCreditScore.com, which provides a FICO score based on Experian report data.