Pay your bills “on time”.

 Be punctual – Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score.

But let’s talk about “Late Payments” for this week. Late payments cost you in points, big time, because of what they mean in increased credit risk to the credit bureaus.  Higher credit risk means loss of points and lowered credit score. OK, so you make your payments on time and your scores are still low.

What is causing this to happen? Let’s look at what is happening with your payments.  Let’s say you have a credit card that is over the 45% debt to credit ratio.  You make your payment on the due date but when you pull your credit report, your points have dropped.  What is happening is that the credit card is getting your payment “on time” but the recording date when they determine your interest charged can actually be before the due date.  This creates more revenue for them as well as causing your balance to be recorded higher to the credit bureaus thus causing your scores to drop.

When you think your payment has been posted to your account and lowered your balance to less than 45% by the due date, they have already posted to the credit bureaus and charged you interest and your scores have dropped.  Surprising, but true.

So, the solution is to look over your credit card statement and find when the interest is entered onto your statement.  Then make your payment to be sure to arrive before the interest is applied to your statement.  Lower balance, lower interest, lower risk, and a higher credit score!


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