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Does Autopay Affect Credit Score?

Written by Allison Martin

Allison Martin is a personal finance enthusiast and a passionate entrepreneur. With over a decade of experience, Allison has made a name for herself as a syndicated financial writer. Her articles are published in leading publications, like, Bankrate, The Wall Street Journal, MSN Money, and Investopedia. When she’s not busy creating content, Allison travels nationwide, sharing her knowledge and expertise in financial literacy and entrepreneurship through interactive workshops and programs. She also works as a Certified Financial Education Instructor (CFEI) dedicated to helping people from all walks of life achieve financial freedom and success.

Updated June 11, 2024​

5 min. read​

does autopay affect credit score

Autopay can potentially be beneficial for your credit score by assisting you in making consistent, on-time payments. Timely payments are crucial to your creditworthiness, as payment history is the most significant factor in determining your FICO score. When you utilize autopay, your payments are made automatically, reducing the chance of missing a payment or incurring late fees.

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What is Autopay?

Autopay is a convenient feature that allows you to schedule automatic payments from your bank account to pay various bills, such as credit card bills, utility bills and loan payments. By setting up autopay, you eliminate the need to remember due dates and manually initiate payments, reducing the risk of late or missed payments.

How Does Autopay Work?

You’ll need to sign up for autopay with the service provider or financial institution that manages the bill or credit account. This can usually be done through their website or mobile app, making it easy for you to get started. When setting up autopay, you’ll need to provide your bank account information and specify the amount you want to pay and the frequency of the payments.

Once you’ve set up autopay, your payments will be made automatically and deducted from your bank account according to the schedule you’ve chosen. This means that you won’t have to worry about manually making each payment, which can help you avoid late fees and protect your credit score by ensuring timely payments. However, it’s essential to monitor your bank account to ensure you have sufficient funds to cover the payments.

Does Autopay Affect Credit Scores?

Setting up autopay for your bills might seem like a convenient way to ensure timely payments and avoid late fees. But does it have any impact on your credit score? Not necessarily, but enrolling can help improve your overall credit health.

Money management apps like Current (*) offer features like automatic payments, as well as transfers to your savings account to stay on top of your financial goals. This particular app also features the Current Build Card, a secured card that you can use like a credit card but prevents you from spending over your credit limit, as it is capped to the amount of money you have in your spending account. Reporting the positive payments to a credit bureau will help you improve your credit score; Current does it automatically for you each month. Aside from this credit building card, they also offer savings pods that earn up to 4.00% bonus (1) on your savings and a bunch of budgeting and financial tools to stay on top of your money. Visit Current’s website to learn more or to open an account, no matter your credit score.

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The Impact of Autopay on Different Credit Factors

When it comes to credit scores, your payment history plays the most significant role, accounting for 35 percent. Autopay can help with that by automatically deducting payments from your bank account before the due date, reducing the risk of missed or late payments. However, it’s important to note that autopay itself doesn’t directly improve your credit score.

Using autopay can help you establish a stellar payment history with minimal effort, as payments are made automatically and on time. Just make sure to schedule the automatic payments before the due date and ensure there are sufficient funds in your account to cover the transactions. If a scheduled payment bounces due to insufficient funds, you might end up with late fees and a negative impact on your credit score.

The Benefits of Using Autopay

Ensures Timely Payments

By setting up automatic payments, you can ensure that your bills are paid on time, every time. Autopay takes the guesswork out of remembering due dates, making it less likely for you to miss a payment and negatively impact your credit.

Reduces Human Error

Making manual payments leave room for human error, such as forgetting to pay on time, entering incorrect information or paying the wrong amount. Autopay eliminates these mistakes by automatically withdrawing the correct amount and submitting it to the designated payee.

Minimizes Stress in Managing Finances

Keeping track of multiple bills and their respective due dates can be overwhelming, especially with a busy lifestyle. Autopay simplifies the process by automatically taking care of your monthly payments. This means you can focus on other aspects of your finances without the added stress of managing manual payments.

The Drawbacks of Using Autopay

Overdraft Fees and NSF Charges

If you don’t have enough money in your bank account when an automatic payment is scheduled, you could face fees from your financial institution and potentially the billing company. Overdraft fees can be quite costly, and multiple instances may create financial strain and lead to a negative credit history. To avoid this risk, always ensure you have enough funds in your account before any scheduled autopay transactions.

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Potential Mismanagement of Accounts

When you set up autopay, it’s important to stay vigilant and continually monitor your account activity. This is because relying too heavily on automatic payments can lead to mismanagement of your finances. Forgetting to verify the payment amount or not noticing irregularities may harm your financial health. In addition, autopay may create a sense of detachment from your money, making it harder to maintain a budget and stay on track financially. To mitigate this risk, make a habit of regularly reviewing your account activity and keeping an up-to-date budget.

Lack of Awareness of Payment Issues

Another drawback of using autopay is the potential lack of awareness regarding payment issues. If a payment doesn’t go through due to technical issues or if an unauthorized party gains access to your account and changes your payment information, you might not be immediately aware of the problem. This could lead to late fees, penalties, or a negative impact on your credit score. To ensure that you’re aware of any payment issues, monitor your account for any discrepancies and sign up for notifications from your billing company, alerting you to any unsuccessful attempts at making automatic payments.

How to Set Up Autopay

Gather all the necessary information needed for your automatic bill payments. This includes your account numbers, billing cycle dates and the necessary bank account details for the transactions. Keep this information handy as you proceed.

Next, log in to your online account portal for each service provider or creditor you wish to set up autopay for. This could be your credit card company, utility provider, or even subscriptions. Locate the payment or pay bill section within the online portal.

In the payment section, find the option for automatic payments. This may be labeled differently depending on the provider, but it should be relatively easy to locate. If you have difficulty finding it, don’t hesitate to contact the service provider’s customer support for guidance.

Once you’ve found the autopay option, follow the instructions provided on the screen to set up your automatic payments. This typically involves entering your bank account information for transactions, verifying the account details and selecting a payment date. Be sure to choose a date that aligns with your billing cycle and allows for enough time to clear any potential processing delays.

After confirming your autopay settings, jot down any confirmation numbers or messages provided by the service provider. Keep track of these in case you encounter any issues with your automatic payments in the future. Remember, it’s essential to regularly monitor your bank account and ensure that your autopay setup is functioning properly to avoid late payments or unwanted surprises.

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How to Maximize the Use of Autopay

Choose Appropriate Accounts

These typically include recurring payments, such as utility bills, phone bills or loan payments. Furthermore, consider combining autopay with credit monitoring to keep track of your progress and make adjustments as needed.

Monitor Your Accounts Regularly

Although autopay is convenient, it’s vital to monitor your accounts regularly. Check your statements to ensure correct payment amounts and dates. Promptly report any discrepancies, as these could negatively impact your credit score.

Automate Reminders for Payments Due

While autopay automates the payment process, it’s best to set up reminders for when payments are due. These notifications keep you informed and allow you to anticipate upcoming payments.

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