You know you’re supposed to pay your bills before they’re due, but sometimes, life gets in the way and your payment doesn’t quite make it in time. You’re not alone – according to our data, approximately 38 percent of Credit Karma members have had at least one late payment in the past seven years.*
Why does it matter?
Late payments have the potential to torpedo your credit score faster than a sinking ship. About 35 percent of your credit score is based on your payment history, which makes it one of the most important factors of your overall credit health. Fortunately, you have a lot of control over this area. We’ve collected a few general tips to help you stay on top of your bills.
1. Follow a budget.
Knowing how much money you have coming in, and how much money you have going out is essential. By creating a budget, you’ll be able to spot times where you might come up a little short financially, and plan accordingly. It’s also good to budget in cushioning for fluctuating expenses like your utility bills and gifts.
2. Schedule automatic payments.
Whether it’s your credit card, mortgage or even insurance payment, almost all bills can be paid online these days. If your provider takes online payments, you may be able to log on to your provider’s website and schedule payments well before the due date. If you link your debit card, the payments can be made each month with no further action on your end. Of course, for this strategy you would need to have enough cash in your checking account to cover your payments. Some companies even offer incentives, like a small discount, for scheduling automatic payments.
3. If feasible, pay your bill as soon as it is received.
Online, over the phone or through mail – whatever works best for you. Paying immediately is a good option for accounts where you cannot set up recurring, automatic payments as it reduces the potentially disastrous chance of re-discovering the bill after the due date.
4. Set reminders.
You could keep it old school and use a paper calendar to keep track of due dates, or choose from a bevy of financial apps to receive electronic reminders of your bills and financial obligations. You may also enable bill reminders through Credit Karma’s free account monitoring service. If you’ll be mailing checks, leave yourself some wiggle room for the transit time – generally speaking, one week should be plenty.
5. Adjust your due dates.
Some accounts, particularly credit cards, let you choose your own due date. If all of your bills are due the same week, money could get a little tight. It might be helpful to schedule your due dates closer to payday, or spread them out throughout the month, depending on your cash flow.
It’s important to keep your credit in shipshape by paying all of your bills on-time. To recap, you may find it helpful to begin following a budget, taking advantage of automatic bill payment services and setting reminders to help you stay on top of your bills. While paying your bills on-time is critical to your overall credit health, you also generally want to take care of the other components of your credit score such as credit card utilization rates, hard inquiries and derogatory marks.