Perhaps the most important concept for improving your credit score is to keep all your monthly payments of all kinds current every month. The longer you are able to do this, the higher your credit score will be. This includes your rent or mortgage, utility bill, phone bill, credit cards, medical bills, car payment, insurance payments, and so on – essentially anything and everything you have made a committment to pay on a monthly basis. If you follow through on those committments each and every month, then you will be viewed as handling credit in a responsible manner, thus the increase in your credit score (and yes, a higher credit score is better).
If you are unable to make all your payments on time in any given month, you’ll have to decide which ones to pay and which ones not to pay. Though effect on credit rating is not necessarily the most important factor in that decision, however, it should definitely be a strong consideration.
For example, not paying rent on your residence or home may not be a hit to your credit score immediately, but typically late payment fees are huge and you’ll end up with a five day quit or pay notice within two weeks anyways, so not paying rent has significant enough consequences that the fact it does not immediately impact your credit score is a mute point, and paying rent should always be a highest priority.
Conversely, many medical bills won’t go into a collections status (i.e. be reported to credit bureaus) until they are past due 60 or 90 days, so you may want to consider paying the utility bill or making a credit card payment first, and then catching up on the medical bill in a little while when you are able to do so.
The general idea here is that you are aware of the consequences of not paying certain bills so that if you find yourself in a cash squeeze, you can make well informed and intelligent decisions about who does and doesn’t get paid, since you are unable to pay everything and therefore have to make a decision.
Considerations include maintaining basic life necessities such as shelter, food, utilities, and water, impact on credit score, late fees that will be assessed, keeping debts out of collections, avoiding disconnection notices, and more. Don’t arbitrarily decide what not to pay, and don’t just pay a certain lender because they are bugging you so much it’s driving you crazy.
Know what you are doing, take control, and be straightforward and forthcoming with your lenders. When you can see there is not going to be enough money for everything in the near future, be proactive in your decisions not reactive based on the fallout of consequences.
Finally, if you find yourself in the decision of always deciding what not to pay, and you just can’t seem to get caught up, it may be time to consider some significant changes of lifestyle so that you can once again live within your means.
You can do it!
