Payment history shows how you've paid your accounts over the length of your credit. This evidence of repayment is the primary reason why payment history makes up 35% of your score and is a major factor in its calculation. Research shows that your track record of payment tends to be the strongest predictor of the likelihood that you'll pay all debts as agreed to. And as you can imagine, a lender's number one priority is your past record of paying back (or not) your loans.
A few late payments are not an automatic "score-killer." An overall good credit history can outweigh one or two instances of late credit card payments.
However, having no late payments in your credit report doesn't mean you'll get a "perfect score." Your payment history is just one piece of information used in calculating your FICO Scores.
Types of accounts considered for credit payment history
Account types considered for credit history could include:
- Credit cards (Visa, MasterCard, American Express, Discover, etc.)
- Retail accounts (credit from stores where you shop, like department store credit cards)
- Installment loans (loans where you make regular payments, like car loans)
- Finance company accounts
- Mortgage loans
Bankruptcy public records and collection items
These types of events are considered quite serious, although older items and items with small amounts will count less than recent items or those with larger amounts.
Negative factors include:
- Bankruptcies - Bankruptcies will stay on your credit report for 7-10 years, depending on the type
- Collections - Third party collection accounts stay on the credit report for seven years from the original delinquency date of the original debt or the date of the first missed payment, after which the account was no longer brought current. You may see both the collection account and the account with your original creditor on the credit report.
Components that make up your payment history:
- Payment information on credit cards, retail accounts, installment loans, mortgages and other types of accounts
- How overdue delinquent payments are today or may have become in the past
- The amount of money still owed on delinquent accounts or collection items
- The number of past due items on a credit report
- Bankruptcy public records
- The amount of time that's passed since delinquencies, bankruptcy public records or collection items were introduced
- The number of accounts that are being paid as agreed
Tips to enhance your payment history.
The tips below might sound a little obvious, but reading them might help give you that push to make that first move. Payment history can be improved upon, but there's only one person who can do that... You. Here's how:
- Pay bills on time. Sounds simple, and easier said than done, but it's the best way to start getting your payment history back on track. Set up a budget to ensure you have the money necessary to pay your bills on time. It might mean some sacrifices, but better to give up a few things now than to ruin your credit for a lifetime.
- Get/stay current on missed payments. The older a credit problem, the less it counts toward your credit score. So the longer you pay your bills on time, even after having late payments, the more potential for your FICO Scores to increase.
- Contact creditors/get help. Contact your creditors to see if they can help you in any way, like lowering your interest rate so you can pay off your debt faster. You can also meet with a credit counseling service who might be able to assist you with properly budgeting your money and consolidating your debts — all potentially help you improve your credit history.
Payment history is the biggest score factor, so it's important to pay close attention to it and make sure your bills are paid on time. Read next about amount of debt and how that factors into your FICO Scores too.
