The biggest overlooked cost is the effect a lower credit score can have on consumers. That’s because those with a lower score tend to be seen as more of a risk and therefore offered higher interest rates, which can add up, especially if you have multiple loans. Lower credit score puts a drags on your finances.
Improving your credit score by just 35 points — from roughly a sub-prime score of 660 to a “good score” of 695 — can save you $301 a year in interest expenses, according to Doxo’s analysis. Not only can good credit mean better interest rates, it can also help consumers get approved for rental applications for apartments and homes, potentially allowing them to snag lower-cost options. Plus, good credit may reduce or eliminate deposit requirements for utilities and may even affect insurance rates.
There are a number of ways you can work to improve your credit score, such as
-automating your payments. That way, you’ll never miss a payment, keeping you from damaging your credit score.
-Another easy win when improving your credit is to become an authorized user. If you have a parent or family member with good credit, you can ask them to add you as an authorized user on their credit card.
-You should also keep track of your credit utilization, which is the ratio of your credit card balances to the total amount of credit you have available. It plays a big factor in calculating credit risk and therefore credit scores. When you use more than 30% of your available credit, your credit score will typically drop because it signals to credit card companies that there’s a greater risk you may not pay it all off, or that it may take a while to do so.
Right now, payments that you make on BNPL loans, like PayPal Pay in 4, are not usually included on your credit report. They do not raise your credit score, though missed payments may hurt your credit score.
Getting utility services ― gas, electricity, water ― has a lot to do with your credit history. The better your credit history, the easier it will be for you to get services. And your on-time (or late) payment history with utility providers can be important for your credit history in the future.
If you’re behind on paying your utility bills — or you expect to be — contact the utility company immediately. Look at payment arrangements, budget billing plans and different ways to lower utility usage.
The simplest approach is to just ask your lender to take the late payment off your credit report. That should remove the information at the source so that it won’t come back later. You can request the change in two ways:
Call your lender on the phone and ask to have the payment deleted. The first person you talk with most likely will not be able to help you. Politely ask to escalate the issue and speak with a manager or a department that can approve your request. Once you have them on the line, make your case politely.
Write a letter and ask for a removal. Often known as a goodwill letter, these requests allow you to formally explain why the payment should be removed. Include proof that supports your case—the more, the better.
If the late payment is accurate, you can still ask lenders to remove the payment from your credit reports. They are not required to do so, but they may be willing to accommodate your request, especially if one or more of the following apply:
You paid late due to a hardship like hospitalization or a natural disaster
The late payment was not your fault, and you can document the cause (for example, your bank made an error and will provide a letter explaining the problem)
You can offer them something in return, like paying off a loan that you’re behind on
You usually pay your bills on time and you made a one-time mistake