COMPONENT 1 –
CREDIT HISTORY
35% OF YOUR CREDIT SCORE

Keep in mind that lenders do not know you personally, so they use your credit report and your credit score to gauge your financial character and whether they want to give you credit or not. Your credit score consists of five different components. The financial steps you take can hurt or help your scores and sometimes can hurt you in one component and help you in another. The one explained here with tips on how to improve your credit score is Payment History, which makes up 35% of your Credit Score. This component reviews whether you pay your bills on time. This also factors in whether you miss payments or do not make payments all together. This component does not look at all payments you make everywhere such as daycare, rent, cell phone bills and similar payments; it looks only at credit payments meaning payments made on any credit accounts where you have borrowed money.

This component makes up the largest portion of your credit score because lenders want to know whether you have made previous payments on time before extending new credit to you. You earn trust by showing that you have kept up with making payments in the past. Becoming delinquent and making late payments or missing payments will lead to a lower credit score in this category. 

STEPS TO IMPROVE YOUR CREDIT SCORE REGARDING PAYMENT HISTORY

– Pay your bills.

Setting up autopayments can be a great way to help accomplish this. Some lenders and loans, such as some cell phone carriers or Federal Student Loans, will even give you discounts if you set up autopayments. When setting autopayments, you do want to be careful that they are not charging you for the payment method you are using. Some lenders will charge an extra percentage fee or flat fee if you make payments with a credit card. If you do not like the idea of authorizing lenders to take payments directly from you, you could alternatively set up bill pay reminders and alerts so that you know when a payment is due. 

– Do not make late payments or skip payments.

If you have an installment loan, you can reach out to your lender and see if you can get an extension on your payment. They may have two possibilities for you: deferment or forbearance. With a deferment you can pause your payment and push your payment back; you typically must qualify for a deferment. If they have a forbearance policy, you can utilize this to push your payment back. With a deferment your payment is paused completely, but with forbearance your account continues to be charged interest during the forbearance period. For example, let’s say you get a 3-month forbearance on an account with a balance of $10,000 and your account earns $100 in interest in those three months. When the payment resumes after the three months the $100 will be added to your balance of $10,000. Taking advantage of these options rather than being late or skipping payments will ensure that your credit score isn’t negatively impacted by delinquency. 

– Contact the credit bureaus and ask if they can remove negative payment history from your credit report.

If you have a late payment on your report, typically starting with being 30 days late, or a missed payment impacting your credit score, you can call the credit bureaus and see if they are willing to remove it if you have settled the payment. If not, you can also ask them to add notes that the payment has been made so that new lenders will be able to see that the payment is no longer outstanding. Collection accounts stay on your report for seven years and here again it would be beneficial to reach out to the three credit bureaus to add notes that the payment has been made. You also want to review your credit reports to ensure that there aren’t inaccuracies bringing down your credit score. 

Other Credit Components