Autopayments a Great Way for Consumers to Keep Solid Credit Standing Intact

Millions of Americans have to contend with a number of bills in their everyday lives which require payment each month, and that can sometimes lead to problems when it comes to keeping track of all of them.

Having a large number of bills every month is something with which most Americans are likely familiar. Between cable, gas, electric, cellphone, insurance, mortgage, auto loan and credit card payments, the number of checks one has to write in a given month to make sure all their obligations are covered can grow pretty quickly, and when other stresses also exist in one's life, as they so often do, some of these bills may slip through the cracks in any given month. It's understandable, but it's also potentially very problematic.

The reason consumers should try to avoid making any late payments at any point in their lives is that missed deadlines for those related specifically to credit — loans, credit cards, mortgages, and so forth — can have a massive negative impact on their scores. For this reason, it might be wise to set up automated payments through their banks as a means of making sure all bills are paid on time every month for at least the minimum payment, if not more than that, to avoid any confusion that might lead to a diminished rating.

Why it matters
Missing any type of payment on a monthly bill is typically not advisable; utilities companies can discontinue service, insurers can discontinue coverage, and lenders can hit borrowers with massive penalties. But beyond that, there can sometimes be more pressing issues that arise where issues concerning repayments into credit accounts are concerned, largely because these can do massive amounts of damage to a credit standing in very short order.

The fact of the matter is that payment history — specifically, the ability of borrowers to pay all their bills for their various types of financing on time and in full every month — makes up 35 percent of one's credit scores, the single largest portion of the score comprised by any one factor. This means that the ability to keep up with all deadlines is of the utmost importance, and anyone who fails to do so will likely have to deal with massive consequences if they make any missteps. Unfortunately, anyone who misses a payment can see their score fall by more than 100 points in some cases, and there is no real way to clear such a mistake from their borrowing history; the only thing they can do to smooth over the issue, rather than remove it, is make sure they are able to make contributions as normal for a period of several months or more. Doing so will help to show lenders that the incident was an isolated one, and not the start of a new habit of missing deadlines.

Where automating the process comes in
It is for this reason that automatic payments can be so helpful. By going into an online banking platform, or those provided by lenders themselves, and setting up automatic monthly payments, borrowers can help to ensure they simply won't miss any payments at all. Having this kind of constant payment system set up can also give consumers a little bit of peace of mind when it comes to potential worries about their abilities to make sure everything is taken care of.

Automated payments may also help improve credit scores in another way: By more quickly reducing debt. Consumers who know exactly how much they're going to contribute to their monthly credit card bills every month, for example, may be in a better position to budget for these deductions. That, in turn, may also allow them to pay more than the monthly minimum every month without even having to consider it; and because another 30 percent of one's score is comprised solely of how much debt a borrower is carrying as a percentage of their total limits, the larger the monthly payment every month, the more likely these automatic contributions are to help improve credit altogether. In general, borrowers should aim to owe about 30 percent of their total allowable limits or less at any given time as a means of ensuring the highest possible scores in this respect.

Of course, borrowers trying to deal with improving their credit scores may also want to take the time to check their credit reports every once in a while to make sure everything is as it should be. In some cases, there may be unfair markings on such a document which can serve to lower a borrower's credit rating considerably. Consequently, it might be wise for those people affected by these issues to contact a credit repair law firm and try to get them sorted out as soon as possible.