YFSCREDIT.COM – Day 9 – How To Improve Your Credit – Payment History

Hey Wealth Builder! With your 1st letter in the mail, we can now switch gears to something that you have 100% control over. That’s what it takes to improve your credit score by your actions.

Remember when I said this on day 2 of the challenge

Your credit score is three digit number which represents how good you are at returning lunch money aka paying back and managing loans. To put it another way, it’s a byproduct of your financial behavior. The good news is you have way more control over your credit score than you think.

Then shortly after, I said this?

The most popular and used credit score algorithm is by FICO. The FICO model has a credit scale ranging from 300-850, and you can gain 550 points.

35% of your score is paying on time (192.50 pts)
30% of your score is total utilization (165 pts)
15% of your score is how long you had credit (82.50 pts)
10% of your score is types of credit (55 pts)
10% is new credit and or inquiries (55 pts)

Well, the next few days I’m going to break down each aspect of the credit score and tell you what to do to improve it.

Today is all about showing you the best way to “pay your bills on time” since this is 35% of your credit score you have to get this right. You cannot have the credit you deserve with late payments!

The easiest way to be successful at paying your bills on time is with a written budget. Not a budget in your head. A written budget with your income, expenses and savings goals on it and to automatically pay the minimum amount due on time.

There are many tools to help you create a budget, but I like to use an excel spreadsheet or google sheet.

Like everything else we are going to break this down into steps

Step #1 – Print out all your statements and put them into a debt pile
I’m talking any credit card bills, utilities, cell phone bills, mortgages, auto loans, student loans, personal loans, etc. etc .

Step #2 – If the debt doesn’t have a statement write it down on a piece of paper or flash card and put it into the pile

Sometimes you may owe a friend or family member. You won’t have a statement, but you need to plan to pay them back.

Step #3 – Go to your debt pile and call all your providers to ensure you’re automatically paying the minimum payment by the due date.

You have just ensured that you will never have a late payment again and will gain all possible points on the credit score algorithm for payment history.

You may be thinking.

Dom, shouldn’t I pay more than the minimum?

Absolutely! If you can pay the bill in full by the due date every month that’s even better financially since you’ll avoid interest, but we are talking about what the credit algorithm requires, and that is to only pay on time.

I cover why paying more and for what particular accounts it’s better for in the next few days, but if your goal is to ensure that you capture all 35% or 192.50 points you just have to pay the minimum payment on time.

We need to ensure we cover the minimum payment before we do more. We are building your foundation for success one brick at a time.

When I did this exercise a few years ago, I had to call 30 different creditors to set up automatic payments. It would be hard for me to remember to pay 30 people every month manually. So to make things easier for me and to ensure that I’m successful at always paying my bills on time I set up automatic payments of the minimum payment amount.

Another thing I want you to do is to look at your debt list and think of ways to reduce it.

Do you need all of those services?
Can you downgrade or eliminate anything?

After completing today’s lesson, post in our accountability group the number of creditors you have set up with automatic payments.

See you bright and early tomorrow!

Our Private Challenge Forum: Wealth Builders: YourFinancesSimplified