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1. “The Benefits and Risks of Using Autopay for Your Bills”

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How Automatic Bill Pay Can Improve Your Credit Score | O1ne Mortgage

How Automatic Bill Pay Can Improve Your Credit Score

Introduction

In today’s fast-paced world, managing finances can be a daunting task. One effective way to ensure your bills are paid on time and to avoid the damaging effects of late payments on your credit score is through automatic bill pay. At O1ne Mortgage, we understand the importance of maintaining a good credit score, and we’re here to help you navigate the benefits and potential pitfalls of autopay. For any mortgage service needs, feel free to call us at 213-732-3074.

How Automatic Bill Pay Can Help Your Credit

Payment history is the most significant factor in determining your credit scores, accounting for 35% of your FICO® Score and about 40% of your VantageScore. Setting up autopay ensures that your payments are made on time, which can help improve your credit. Even one late payment can cause significant harm to your scores and remain on your credit reports for seven years. By using autopay, you can avoid these detrimental effects and build a strong payment history.

How Autopay Works

Autopay works by giving your creditor permission to access your checking account and withdraw the amount due on your payment due date. Here’s how it works for different types of accounts:

Installment Loans

For installment loans such as mortgages and auto loans, the amount due is the same each month. Your lender may offer the option to withdraw the full payment on the due date or take out half of the payment every two weeks.

Credit Cards and Other Revolving Accounts

For credit cards and other revolving credit accounts, balances typically vary month to month. Many card issuers offer the following autopay options:

  • Make the minimum required payment: Ensures your payment is recorded on time.
  • Pay the last statement balance in full: Prevents finance charges and preserves your payment history.
  • Pay a custom amount: Allows you to set a specific payment amount each month.

Utility Payments and Other Bills

Many utility companies, cellphone carriers, and property management companies offer automatic payment options. If not, your bank or credit union likely offers an automated bill payment service. While this can help you avoid late-payment fees, it historically didn’t benefit your credit scores unless the billing entity reported payment information to the national credit bureaus. The free Experian Boost® feature changes that by letting you share your utility and cellphone bill payment history on your Experian credit report.

What to Watch Out For When Using Autopay

While autopay can be beneficial, there are some risks to be aware of:

Insufficient Balance

If you have an insufficient balance in your checking account when a creditor attempts a scheduled withdrawal, it could trigger a late fee from the creditor and an overdraft fee from your financial institution. To avoid this, monitor your account balance regularly.

Monitoring Accounts

Even with autopay, it’s essential to review your credit card bills and checking statements for suspicious activity. Unauthorized transactions could be signs of credit fraud or identity theft, so report them to your creditor or financial institution as soon as you spot them.

The Bottom Line

Automated loan and credit card payments can simplify your monthly finances, prevent late fees, and help build a history of timely payments that leads to credit score improvement. Using autopayments on your cellphone or utility bill, combined with Experian Boost, is another way to harness technology to help build your credit scores.

At O1ne Mortgage, we are committed to helping you achieve your financial goals. For any mortgage service needs, call us at 213-732-3074. Our team of experts is ready to assist you in finding the best solutions for your financial situation.



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