Advice on paying off old debt and improving credit score - The Bills.com Blog

Bills.com Blog > Debthelp Questions > Paying Off Old Debt and Improving Credit Score

Advice on paying off old debt and improving credit score

Question: I have phone bills and little other things on my credit how do I get them all added up and start paying so that i can raise my credit score?

Answer: The best way to determine old debts is to obtain a copy of your credit report from each of the three major credit reporting agencies?Equifax, Experian, and TransUnion. Your credit reports should list the accounts in past due/collection status. You can get a free copy of your credit report by visiting www.annualcreditreport.com.

Once you have your credit reports, you need to examine each one them carefully and make a list of the accounts that are showing past due or in delinquent status. You credit reports will also state the name of the creditor and their contact details. You will then need to contact the creditor for each one of the negative accounts and workout a payment plan with them. It is important that you keep record of all your communication with them. Once an agreement is reached and you make the payments that are due, make sure that you ask the creditor to report the same to all the credit bureaus.

Once you finish paying all of the past due accounts, and once it is reported as paid and closed, your credit should start to improve.

Since you are worried about your score, let me tell you a bit more about credit scores.

The most important step in understanding your credit score is to know what a credit score is and how it is determined. A FICO credit score comes from the Fair Isaac Company. Three quarters of all lenders use the FICO credit score when considering requests for loans or credit which is why this is an integral part of understanding your credit score.

Given below is a rough formula used to calculate your score:

~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you've opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The most important item is your mortgage. Make sure you pay it on time every month in order to maintain a good credit score. Installment

loans, where you borrow a set amount to buy new furniture or appliances, for example, are given more weight than credit cards.

Keep your spends well below your credit limits, because your FICO credit score will definitely be lower if you are maxed out on your credit cards. Don't have more than two or three credit cards because a large number of credit cards also lowers your FICO score. Don't apply for several credit cards at one time; it makes lenders nervous and will lower your FICO score. Other factors also affect your score, such as home ownership, which raises it, and moving frequently, which lowers it. Bills.com has comprehensive information about credit scores and articles on how to understand credit scores. You can read more on our credit information page .

I hope the information provided helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

Submit questions/comments about this post:

Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

Name (required)
Email (required never displayed)
Comments
	Please enter the characters you see in the image above.