Strategy 1: Pay Your Bills on Time. Although this strategy may seem extremely obvious, late payments are the most common piece of negative information that appears on peoples' credit reports and are often responsible for significant drops in credit scores. When it comes to loans and credit cards, it's vital that you always make at least the minimum payments in a timely manner each and every month, with no exceptions.
The impact on your credit report and credit score will be considerable if you're late or skip one or more mortgage payments, however, making late payments on other types of loans or defaulting on any loans will also have a disastrous impact on your credit score that will have an impact for up to seven years.
The benefit to having credit cards is that you can determine how much you spend using them, then decide how much you wish to pay back each month, as long as that amount is equal to or greater than the minimum monthly payment due. This allows you to budget your money and make intelligent decisions, based on your financial situation. Simply paying the minimums on your credit cards will keep those accounts from being late, however, the costs associated with that decision (in terms of fees and interest) will often be significant over time. Plus, this strategy will keep you from greatly reducing or paying off the debt.
One of the worst mistakes you can make, aside from making late mortgage payments, is having an account go to collections. This means that you've neglected to pay your monthly minimums or have skipped payments for several months and the account gets turned over to a collection agency. Once this happens, regardless of whether or not you ultimately make the payments or settle the account, your credit score will be negatively impacted for up to seven years.
