A solid credit score is an important part of your finances, which is why people are always looking for ways to boost it. This has led to individuals wondering if steady income can positively affect their score.
Regular pay does not directly affect your credit score; however, it does have an indirect impact on whether or not it increases.
Can Regular Payroll Help Boost Your Credit Score?
Your credit reports do not contain your income because it is not factored into any credit scoring systems. Therefore, your pay cannot affect your credit score directly. However, having a regular payroll can indirectly boost your credit score.
There are several ways to maintain or elevate your credit score, and they all revolve around your ability to pay off bills on time. A steady income allows you to make on-time, payments, get your finances in order, and use your credit wisely, which in turn, increases or stabilizes your score.
Hence, without a regular payroll to help you pay off these obligations, you will fall behind or pile up debt, hurting your credit score.
That said, even though your income does not have a direct impact on your credit score, it does affect your ability to get approved for loans or credit.
How Your Income Affects Your Credit Limit
Your income plays a huge role in determining your eligibility and credit limit. This is because your annual income affects your debt-to-income (DTI) ratio (the percentage of your gross monthly income that you spend on your monthly debts).
Your DTI is a factor credit card companies and lenders consider when deciding on your creditworthiness.
Essentially, if your DTI is low and your income is high, then you will have access to a higher credit limit, which might positively affect your credit utilization ratio.
On the other hand, if you have a high DTI ratio and your income is low, then the odds are your credit limit will be low. This is because this information shows that you have a high amount of debt with a low income. So, it proves that you might find it challenging to pay off your monthly debt.
Generally, if your DTI ratio is higher than 43%, you might struggle to get approval. Several lenders require your DTI to be 36% or below.
How to Increase Your Credit Score
It is vital to have a good credit score because, without it, you will not be able to get certain benefits or decent loan offers except for CreditNinja Loans or loans from similar platforms.
There are various tips and tricks to help you achieve your ideal credit scores. Following them can help you avoid financial anxiety. Here are some of these tips.
Make On-time Bill Payments
Paying your bills on time is a surefire way to boost your credit score. Also, it is essential in maintaining your current score because it is the largest factor in credit scoring systems.
If you constantly pay your bills late, no amount of effort or strategy could improve your score. Furthermore, your late payments might reflect on your credit reports for seven years and six months.
Leave Old Accounts and Handle Delinquent Ones
Your credit score has an age-of-credit section that monitors how old your credit accounts are. Typically, the older your credit accounts, the more appealing you are to lenders. So, it is best not to close old credit accounts, even the ones you are no longer using.
Granted, the credit history of the accounts will still show up on your credit report. However, closing them when you have a balance on other accounts means your available credit will be lower and your credit utilization will be higher. Sadly, all these could lead to a lower credit score.
Furthermore, ensure to address delinquent accounts by resolving them. For instance, if you have a credit account where you missed a couple of payments, you should try and pay what you missed, then come up with a plan for future payments.
This action will not remove late payments from your credit history, but it will positively affect your payment history in the future.
Address Any Credit Report errors
A single error on any of your credit reports could negatively affect your score. Fortunately, disputing these errors can help to boost your credit swiftly.
All three major credit bureaus (Equifax, Experian, and TransUnion) offer one free report every 12 months, so you can easily use them to check. You can visit AnnualCreditReport.com and request your report.
After getting the report, you should check for errors like payments that were wrongly marked as late or if your report contains another individual’s credit activity. When you find these errors, you can dispute them.
Conclusion
Your regular payroll does not appear in your credit reports. Hence, it cannot impact your credit score.
That said, it can indirectly influence it. This is because, without your regular salary, you cannot keep up with bill payments, which could lead to late payments and excess debt.
Thus, getting paid monthly allows you to stay ahead of your bill and possibly boost your credit score.
