Bad Credit Boot Camp

An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.


Set up autopay on all your accounts

When you set up autopay for your credit card, utility or loan payments, a monthly charge is automatically deducted from your bank account. Autopay is useful if you’re not great at remembering to pay 15 different bills every single month, and find yourself missing payments or racking up late fees on a regular basis.

“Generally speaking, most people end up with bad credit because they’ve failed to pay their bills on time. That could mean anything from being late on their credit card bills to skipping a mortgage payment,” said Holly Johnson, a financial expert and author.

Unlike credit card payments, utilities, rent, and loan payments tend to be a set amount every month, so you’ll always know what to expect. When it comes to comes to credit cards, you should always try and pay off your full balance every month to avoid interest fees. Sometimes that’s not possible, though, and if you make a major purchase that you can’t pay off all at once, setting up autopay to cover your full credit card balance can mean over drafting on your checking account.

Instead, set up autopay for your minimum monthly payment. Different cards use different formulas to calculate minimum payments – some require you to pay based on a percentage of what you owe, while others calculate fees and interest into your minimum payment.24  Either way, your minimum monthly payment is likely going to be a lot less than the full balance of your credit card, and meeting it every month will keep you in good financial standing with your credit card company. Of course, if you CAN pay off your full balance, do so, but keep your minimum payment on autopay, just in case you forget.

Keep your account balances under 30 percent

As we mentioned before, your credit utilization ratio refers to the percentage of your available credit that you’ve used.25  A high credit utilization ratio means that you are carrying a large balance on your card, and the longer it stays that way, the lower your credit score will get. In general, you want to keep your credit utilization rate under 30 percent. If you have a credit limit of $500, don’t carry a balance over $150. If your credit limit is $15,000, keep it under $4,500. To calculate your optimal credit utilization score, take your credit limit and multiply it by 0.3. The number you get is the 30 cap you’ll want to stay under.

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