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Day 8: Credit Report Clean Up
Week 2: Credit Improvement
Day 9: Bills on Lock
Today’s Easy Financial Task: Automate your bill payments to improve your payment history record.
How to rock this task:
- Set up a separate account for your bills
- Automate bill payments from your bills account
On to the next day!
Today, we’re going to talk about paying your bills on time. As we discussed last week, your ability to pay bills on time is the component of your credit history that holds the most weight when calculating your credit score.
- Payment history: 35% of your score
- Amounts owed: 30% of your score
- Length of credit history: 15% of your score
- Type of debt: 10% of your score
- Inquiries: 10% of your score
If you’ve had a few slip ups in the past and not paid bills on time, don’t feel bad.
As time passes, the recent history of paying on time will supersede past missed payments. Then, after seven years, late payments fall off of your credit report altogether.
The purpose of this task is to put in place a process that will help make sure you never make a late payment again.
Here’s how to do it:
Open a Checking Account for Bills
Open up a new account at the same bank where you have your current checking account so you can easily transfer funds from one to the other. The new checking account will be specifically for bills. Make sure the checking account you open offers a bill pay service.
Do not connect a debit card to your bills account. (It’s not a fallback account when you want to go shopping!)
Automate Your Bill Payments
Here’s how to automate payments:
1) Tally up the total amount you pay on various bills.
2) Set up automatic transfers of that amount from your main checking account to your bills account.
3) Use the bill pay feature offered by your bank to send out automatic payments to cover your bills. There’s a reason to use bill pay from your bank instead of setting up automatic payments with each company. You want to avoid putting your information in another company’s system. Having your bank transfer money or write checks on your behalf is safer.
What About Past Due Accounts?
You may be thinking: getting your life together now is all well and good, what about fixing past mistakes?
Another way you can get a credit score boost is by bringing your past due accounts current. It’s considered an “extra credit” on the FICO score metric.
So, if you do find yourself in a situation where you have some late payments on your report (that are accurate), you can turn the tide in your favor by making a change now. Then, use the tips above to make sure you don’t fall back into the habit of paying late again.
That’s it for today, Dream Catchers!
If you have any questions, leave a comment below. Reach out to your accountability partner(s) to keep each other on track.
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P.S. Don’t forget to get your free Live Richer Challenge: Credit Edition Starter Kit. Get it HERE.
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