Consumer Watch: Debt payment tips to keep strong credit rating

What to avoid that might hurt your credit score

Ellen Phillips

Readers are probably a bit tired of hearing about credit misbehavior, but I'd rather bore you for protection rather than ignore more tips in favor of ignorance.

Hopefully, by now everyone affected by the Equifax disaster has squared away their possible problems by credit freezes and are diligently checking every source of financial and medical information. To further ensure your credit score isn't in danger - and this time because of your own ineffectiveness - I urge you to avoid common mistakes. Thanks to Bottom Line Personal for helping.

Never pay bills more than 30 days past due. This grace period is truly a gift as the consumer can pay within this period and avoid delinquency reports to the credit reporting agencies. Once you've realized the problem, don't wait. Pay at least the minimum and give yourself time for the payment to hit the company's books before the thirty days are up.

Speaking of minimum payments, this really is a bad idea. While I understand some folks haven't a choice, hopefully no one makes this type of payment a routine practice. Revolving credit affects debt and sticks us with hefty interest charges. So what to do? Try to use your credit card only if the cash is available to pay off completely or even most of the bill when the statement arrives. (Do as I say and not as I do, please!)

Debt collectors may not be our favorite peeps, but if the debt is legitimate, do not ignore their calls. Whether these people or the company itself is calling and/or sending notices, ignore at your own peril. A default not only looks awful on your credit report, it can destroy your credit for up to seven years. Explain your situation to the creditor. Ask them to work with you; perhaps they will set up a payment plan. Other helpful strategies to discuss include reducing the minimum payment, lowering interest rates, eliminating penalties, and/or extending your grace period. Use credit cards. This advice might sound counterproductive, but if we let our cards gather dust while waiting for an "emergency," the card issuer may cancel the card. Following this decision, our credit scores could fall. Best advice? For example, stop off at Starbucks or another latte retailer to buy a couple of cups of coffee monthly - just enough of a purchase to maintain card activity but easy enough to pay off when that monthly statement arrives.

Pay your taxes, please. Tax liens are visible on credit reports whenever lenders take a peek, plus liens also warn these potential lenders that the IRS has a legal right to seize the applicant's property. Obviously, this threat further jeopardizes the applicant's credit risk. Federal debt is in a class all by itself and includes federally-guaranteed student loans that are a critical risk. These liens and defaults can stay on one's credit report FOR.EVER, even through bankruptcy. The lesson here is to always pay off top-of-the-list federal debt and tax liens before expunging any other bill.

Contact Ellen Phillips at ephillips at