How to Raise My Credit Score by Paying My Bills?

Lenders use credit scores to access your level of risk. Always try to get the highest score you can. A credit score can range from 300 to 850. A high credit score increases the likelihood that you will receive favorable terms on credit cards, auto and mortgage loans. You can raise your credit score by paying your bills. Your credit score is affected by several categories, and how you pay your bills is one of them. When you are 30 days late on a bill, your credit score can drop significantly.

Instructions

1

Make all of your payments on time. A credit score of 680 can be lowered anywhere from 60 to 80 points when a payment is 30 days late, according to Creditcards.com. Your credit score is comprised of five categories: 35 percent for pay history, 30 percent for the amount you owe, 15 percent for the length of your credit history, 10 percent for new credit, and 10 percent for the type of credit used. Note how your pay history accounts for 35 percent of your credit score. This is why it is important to pay your bills on time consistently.

2

Pay down the amount you owe. When you are able to eliminate or pay down debt, you increase your credit score. This category represents 30 percent of your credit score. The amount of credit you use can affect your credit score. When your credit usage, based on all of your creditors, gets to 30 percent, your credit score will start to decrease. If you have a credit card with a limit of $5,500 and the balance is zero, your credit usage is zero. Assume you make purchases in the amount of $1,950. Your credit score will decrease because you are using 35 percent of your available credit ($1,950/$5,500).

3

Make a large payment. In the example above, if you pay $1,000 of your debt, you will reduce your balance to $950 and your credit usage decreases to 17.2 percent ($950/$5,500), which increases your score. This example assumes you only have one credit card. This formula is applied to all of your accounts.

4

Avoid severe derogatory credit. When you miss a number of consecutive payments it could lead to collection accounts, judgments, bankruptcy, bad debts and repossessions. All of these items can lower your credit score. Once your balances are paid off, do not close the account. When accounts are closed, it increases your credit utilization rate and lowers your credit score.