Financial Resource

Since your payment history affects 35% of your credit score, it is easily the most important part of your credit profile. It is also one that you can control. Clearly, the best way to achieve a high credit score and a positive credit report is to maintain a flawless record of full payments, made on-time, over the course of years.

However, for those people who live in the real world, things happen. It is easy to confuse dates, forget to mail a check, or come up short on funds. The important thing is to know what to do and how to manage those small mistakes, before they sink your credit entirely. Here are a few tips on how to manage your payment history:

1. Don’t be late on your payments. EVER. There are plenty of tools you can use, like calendar applications for your computer or iPhone, on-line bill pay, or automatic paycheck deductions that can help you to maintain a spotless payment record. If you are habitually late, or have difficulty remembering to make payments, try setting up an automatic payment through your bank. You can even set up a separate checking account for these static payments, and have the appropriate amount of your paycheck automatically deposited there every month.

If you shy away from automation, or have cash flow issues, companies will often work with you to move your payments around. If you get paid at the end of each month, schedule your phone, cable and credit card bills to come due the first week of the month, when you have the most money in your account. Also, you can work to stay ahead of the payment curve by making your payments as soon as the statement becomes available, usually 30 days prior to the due date. That way, in case an emergency comes up or you miss a payment because you are out of town or short on funds, you have created a 30 day cushion.

2. If you are having a rough financial month and have to miss a payment, make payments on the largest accounts, like your mortgage first. Missing a credit card payment will hurt you less in the long run than a 0 car payment.

3. If you have made the rare late payment on an account in the past, call and ask them to remove the late payment as a courtesy for being a loyal or long-term customer. Point out your history with the company and recent on-time payments, and ask them to consider the late payment as an exception to the rule. If they say no, call back and try to get a different representative on the phone. Lather, rinse and repeat.

4. Check your credit report for any accounts that are marked PAST DUE. These are the accounts that are doing the most damage to your account. When working your way through your financial payments, start here.

5. If you have collection accounts, pay off the most recent accounts first, starting with the largest. Any account older than 4 years can be moved to the bottom of the priority pile, since those creditors can no longer file a lawsuit against you to reclaim their money.

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