The Well

Robert Palumbo | Credit Score Education Centre

The Importance Of On Time Payments

November 16, 2016

Credit scores are tricky – mostly because none of us were educated on the best practices – or even the worst practices when it comes to the magic number. Of course we know not to live outside of our means, to always save for an emergency, and to follow our budgets – but the credit bureaus don’t see all of that personal finance goodness.

That is only one of the reasons to always review and monitor your credit report and score. The information the credit agency has may be out of date or in some cases even incorrect. You may have a new job, different address or an account you no longer use but haven’t closed.

Now that we’re on Week Two and you’ve managed to tackle two important steps to changing your credit score for the better, let’s talk on time payments.

Making payments on time, or your payment history, makes up 35% of your credit score.

If you just said “wow” under your breath, us too! Late payments are generally based on the following three measures: how recent they are, how severe they are, and how frequent you are late.

The typical timeline goes as follows: 30 days, 60 days, 90 days, 120 days, 150 days, and then it will be written off as a loss. It is extremely important to keep up with payments, or be aware of whether you may be late, as even one late payment can affect your credit score. Not only may it affect your credit score, it may also affect your future interest rates, and late fees.

So what can you do to control on time payments? That’s easy. Follow these two steps.

1)  Set up automatic payments or reminders. Whether you use an app, or have your online banking send you a reminder, ensure that you are always aware of when payments are due. You can even connect your app or bank to send you a text message saying “Hi, remember me? Your bill. Yeah, it’s time to pay me”.

Write down all of your current loan amounts, consumer debt amounts, mortgages, etc. alongside your interest rates. Don’t forget to include any balance on your credit card – if you’re not paying your credit cards off in fully every month, that’s money you’re borrowing.

2)  Make a budget to pay off your bills. If you want to have a good credit score, one of the best things you can do is start decreasing your debts, or even find a way to move these debts over to an account with a lower interest rate.

For example, if you have a credit card sitting at a 19.99% interest rate, and a line of credit sitting at a 7% interest rate, it may be in your best interest to transfer the amount sitting on your credit card over to a personal loan, and pay off debt more quickly due to lower interest payments. This will allow you to afford the minimum payment – and more!

So, whether you’re looking to better your credit score so that we can help you with medical expenses, a major purchase, travel, or boosting your RRSPs, Borrowell wants you to start here.

The sooner your credit score is taken care of (much like your loveable family pet), the sooner it will love you back. Let your financial goals become your motivation for working towards a stronger credit score, and we’ll be here to help you celebrate at the finish line.

We’ll be back next week to learn about credit utilization, and how credit limits can be used to improve your credit score!  Speak to you then!

Know someone you’d like to invite to take the Credit Score Course?  Click here to email them an invitation or click here to post to Facebook.

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