How Credit Card Payments Will Affect Your Credit Rating

When you apply for a loan for a car, a house or any other reason, including applying for a credit card, the lender will look at your credit rating to decide whether or not to give you a loan. Your history of paying your debts, including credit cards, has a major effect on your credit rating. Here’s some of the ways that your credit card payments will affect your credit rating.

Regular, on-time payments that pay your credit balance in full are best.
If you pay your credit card balance in full every month, you’re an excellent credit risk. You’ve shown that you can handle credit responsibly. Contrary to common belief, carrying a balance on your credit cards doesn’t make you a better risk – paying your bills on time does.

Maintaining a LOW balance on one or more credit cards and making regular payments will bring your credit score up.
It doesn’t matter whether you keep your balance low by charging less or by paying more each month. By keeping your debt within control, you’re demonstrating your ability to pay your bills on time.

Making payments on time will keep your credit record clean.
If you pay AT LEAST the minimum payment on your credit cards every month on time, your credit report will not be negatively affected. In fact, it’s a point in your favor and can offset other things like high balances on your credit cards. As long as you keep paying your bills on time, you’ll keep a good credit rating, if not the best.

One late payment will have a negative impact on your credit rating.
Generally, credit card companies consider a ‘late’ payment to be one that is 60 days past due. If you are late with a payment, but pay it off in full along with other payments that have accrued since then, you’ll still have a black spot on your credit rating. Usually, one late payment will have only a minor effect on your credit rating if the rest of your credit history is good.

More than one late payment in a six-month period will substantially lower your credit rating.
Lenders tend to balk if you’ve made more than one late payment or missed more than one payment in a six-month period. It suggests that you’re in financial trouble and can’t handle the amount of debt that you already are carrying.

How to help yourself make payments on time
One of the easiest, and most overlooked, ways to get those bills paid on time is to use automatically scheduled bill paying through your bank. If you’re the type who hates to pay bills, or is prone to forget a small bill in the crush of writing all those checks, setting up payments online and allowing your bank to make them automatically can save your credit rating from damage. Simply be sure that you have enough in your account to cover your payments each month, set up the payment schedule once, and you can stop worrying about missing or late payments that will affect your credit rating.