A few months ago, I made the mistake of using a retail store credit card to purchase a scarf on sale. It was an impulse purchase and I don’t know why I used the card instead of cash. The item itself was less than fifteen dollars. It must have come with some added incentive to use the card that I could not possibly pass up.
Two months passed, and I did not give this transaction a thought—including when the retailer sent me their monthly statement electronically. In my haste to keep my email inbox clear, I overlooked the e-bill and deleted it. It was only after I got an urgent paper statement that I realized I forgot to pay the charge. I paid it immediately, along with a hefty late fee.
A month later, I was working on a transaction with my local credit union and they pulled my credit report. I was floored. My credit score had dropped over 30 points due to this one bill that I did not pay on time!
The Good News
Providing I stay current on my bills, use credit wisely, and don’t make this same mistake again, I should recover from this drop in my score over time. But this experience makes it clear to me the importance of staying current with your bills.
Pay Your Bills on Time, Every Time
In addition to paying attention to your credit report, The Consumer Credit Protection Bureau emphasizes that the first step to get and keep good credit is to pay your bills on time, every time. Consider setting up automatic payments at the creditor’s website or through your bank’s online site. You do have to watch your bank account’s balance to make sure you have the money to cover these payments. Also, don’t just pay the minimum if you can afford to pay more. The less you pay, the longer it will take to pay off your debt!
Paying on time includes utilities and rent. While good payment history for these bills is usually not reported to the credit bureaus, bad payment history is reported. Late payments will hurt your credit score, and may restrict your ability to obtain these services without deposits or additional fees should you need them in the future.
Developing these positive habits, along with wise use of credit going forward will have a positive impact on increasing your score over time. Look for more information on www.findfinancialfreedom.org under “Resources” for more information on using credit, including managing your credit score.