How Does Credit Payment History Affect your Credit Score?
Credit Education credit score Payment History

How Does Credit Payment History Affect your Credit Score?

Vartika Kothiwal

Table of Contents

“A generation which ignores history has no past and no future.”

Okay, that got a bit heavy, but in some ways, it holds true for your credit score. It’s essential to learn from history to make intelligent decisions about your future. One such learning can be taken from payment history. Your payment history records your payment behavior on all credit accounts like credit cards and loans.

Your payment history also greatly affects your credit score, as high as 35%.

After knowing how much the payment history affects your credit score, your next question would be how payment history is calculated on the credit report.

Want to know what a credit score is and why is it important? Click here.

How is payment history calculated on Credit Report?

In the payment history category, a scoring model can ask you questions like:

  • Are there any late payments on the credit report?

In case your answer is yes, the follow-up questions can be:

  1. How late were the payments (Eg., 30 days, 60 days, 90 days, etc.)?
  2. How long ago did the late payments take place?
  3. How many late payments appear on the report?
    Nagging much? These questions are asked because lenders want to be sure that you will pay back your debt on time when considering you for new credit. The good news is that if you are late on a payment by 30 days once, your credit score won’t be affected much. But, if you have multiple late or severely late payments, your credit score will hit the rocks/bottom.

To find out how a bad credit score can affect your daily life, click here.

Timely payment history: a must for a good credit score

As per financial expert Rob Kaufman, “Both revolving credit (credit cards) and installment loans (mortgage) are included in payment history calculations, although installment loans take a bit more precedence over revolving credit. That’s why one of the best ways to improve or maintain a good score is to make consistent, on-time payments.”

So, paying on time benefits you!

But if this hasn’t been the case with you so far, fret not! Rome was not built in a day. There’s still time.

Ways to improve your payment history

  1. Start paying bills on time
  2. Settle all the missed payments
  3. Prepare a debt management plan
  4. Interact with your creditors

From now on

Let’s pledge to rock our payment history to get the best credit score.