null How to Improve Your Credit: Making On-time Car Payments
If you’re on a journey to improving your credit, establishing a good
payment history can help you get on the right track. Your credit
payment history, which FICO states determines 35 percent of your
credit score, is the record you’ve established over time by either
making on-time or late payments. In a nutshell, your payment history
gives lenders and finance companies a snapshot of how likely you are
to pay your bills.
To help you stay on top of your payments and improve your credit,
here’s what you should know about your payment history.
What does my payment history consist of?
According to FICO, your payment history consists of the following
Credit cards (i.e. Visa, MasterCard, American Express, Discover, etc.)
Retail accounts (credit from stores where you shop)
Installment loans (loans that require you to make regular payments
such as auto loans)
Finance company accounts
These items are listed on your credit report, along with how timely
your payments are on each account. Public records and collection items
are also on your credit report and contribute to your payment history.
This can include bankruptcies, accounts in collections and/or lawsuits.
FICO states it considers the following factors if you have late or
missed payments (also known as “delinquencies”) on your credit report:
How late are the payments
How much was owed
Number of delinquencies
How can my payment history impact my credit score?
Having late or missed payments on your credit report will result in a
negative payment history, which can hurt your credit score.
Conversely, if you pay your bills on time, you will have a positive
payment history. For example, if you received auto financing to
purchase a vehicle and you make on-time car payments every month,
doing so can help you build a positive payment history.
How can I build and maintain a positive payment history?
Paying your bills on time is key to building a positive payment
history, which can ultimately improve your credit. Here are some ways
you can stay on top of your monthly payments:
Set a budget.
If you’re having trouble paying your bills on time, it could be
because you don’t know where your money is coming from and/or
going, which can result in not having a set budget. Setting a
budget can help you plan how every dollar will be spent. Knowing
exactly how your money is being spent should make it easier to
adjust your spending, budget money for your monthly expenses and
pay your bills on time.
Track your spending.
Now that you’ve set your budget, it’s important to keep tabs on
your spending throughout the month to ensure you’re staying within
your spending limit. There are plenty of budgeting tools including
Mint, Truebill and Goodbudget that can help you stay on track.
Write out a list of your bills.
This is a good way to keep track of when your payments are due.
If you find that your payment due dates are scheduled for
different times over the month, maybe set up a few days a month to
make payments so each bill is paid on time or a little bit earlier.
Set aside time for making payments.
While setting up automatic bill payments may improve your ability
to pay on time, you may not be able to or want to pay everything
automatically. For bills that you pay manually, you can either: a)
pay the bill on its exact due date or b) schedule a recurring time
every month to review and pay your bills.
Schedule payment reminders.
Setting bill payment reminders on your calendar or on your phone
is another way you can keep track of your payments. Whether you
make payments automatically or manually, reminders can help notify
you that it’s time to make a payment or check if an automatic
payment has been made.
Paying your bills on time is a major step in your journey to
improving your credit. Since Credit Acceptance reports to the three
major credit reporting bureaus, car buyers who get approved for
financing through our auto finance program have the opportunity to
improve their credit with on-time car payments. If you are someone
with bad credit or no credit who needs credit approval for your next
car purchase, a dealer enrolled in the Credit Acceptance program can help.