Accounting for 35% of your credit score, your payment history is the single most important factor. Your history of making payments on time is the strongest indicator of whether you will pay future debts as agreed upon. Your payment history measures your financial responsibility from day one. The clock starts ticking when you get your first credit card or take out your first loan.
What items make up your payment history?
Your payment record on following accounts—credit cards, retail accounts, installment loans (auto loans, for one), and mortgages.
Any public record and collections on file—bankruptcies, foreclosures,
Missed and late payment details—how late they were, how much was owed, how recently and how many times they occurred. These are important details that come into play when your score is being calculated.
Late payments can be disastrous
To put its impact into perspective, a 30-day late payment can drop on average 90 to 110 points. Of course, this depends on the sturdiness of your previous history. If you’ve been consistently on time, this slippage will be less damaging; but if you haven’t been, the drop could be even more severe.
Whatever that goes on your credit report are reported by creditors (with the exception of judgements). Some creditors might give you 30 days before they report a late payment, and some might report it on the very day it’s due. Don’t take any chances. Pay everything on time.
How do I improve my payment history?
For starters, make on-time payments consistently. This is your number one priority, and no account is less important. With each slip, the damage late payments have to your score will grow exponentially. It can take years to recover your score to the same number.
Next, make sure your payment history is being accurately reported. Pull up your report from any of the online providers (we recommend IdentityIQ, but you can also use any free service such as CreditKarma). Creditors are people, too, and they make mistakes. Collections are sometimes misplaced or even duplicated on reports. By reviewing and straightening out these inaccuracies, you’ll have a report that doesn’t take away from what you’ve accomplished.