How Does Payment History Affect Your Credit Score?

We break down this important aspect of your credit score.

Woman holds a billing statement in one hand and looks at laptop
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If you’re wondering just how important payment history is to your credit score, the short answer is: very. In fact, payment history is one of the most important aspects of your FICO score and determines 35% of your score. Your FICO score is a three-digit number that is compiled based on your credit report’s history, created by the Fair Isaac Corporation, or FICO, and is often used by lenders to determine your creditworthiness.

We break down how payment history affects your FICO score and why it matters, plus how to improve it and how it differs from other factors of your score. 

Have you ever missed a credit card payment? Then you know the agonizing feeling of checking your credit score and realizing that one missed payment took a bite out of your otherwise-stellar credit score.

The Basics of Payment History

Payment history is the record of payments on your debts, including on-time, late, and even missed payments. Payment history accounts for a whopping 35% of your FICO score, followed by amounts owed (30%), length of credit history (15%), and new credit and credit mix, which each account for 10% of your score.

Here’s what’s included in your payment history:

  1. Account payments: Payment history of credit cards, retail credit cards, car loans, finance company accounts, and mortgages. 
  2. Lack of late payments: The number of accounts you have without late payments helps improve your credit score. Late payments can only affect your credit score after the 30-day late payment mark, and some lenders wait until the payment is 60 days past due.
  3. Negative information: This might include public records such as bankruptcies or lawsuits, collections, delinquencies, wage garnishments. For negative information such as late payments, FICO scores consider how late the payment was, how much is owed, how recently they occurred and how many late payments there are. If you have a late payment, it won’t fall off your payment history for seven years.

When you pay off a loan, it may also temporarily impact your credit history. As with any significant change in your credit profile, paying off a major debt like a student loan can cause your score to dip. But don’t panic. Your score should go back up in a month or two. 

Why Does a Low Credit Score Matter?

Lower credit scores can lead to trouble finding a job (since employers may do a credit check as part of a background check), higher interest rates when you borrow money, even be denied credit you need to buy a home or a car. Given that payment history is the most influential aspect of credit scoring formulas, making your credit payments on time is crucial to your success in these other important areas of your life.

Payment history is the record of payments on your debts, including on-time, late, and missed payments. Credit history is essentially a summary of your entire experience with credit It also includes other pertinent information, such as your personal information and how much you owe.  

How Can I Improve My Payment History?

Here are four suggestions for improving your payment history. 

  1. Establish a credit history. If you have a thin credit file with a corresponding lack of payment history information, consider opening a secured credit card, getting a credit-builder loan, or using a retail credit card. 
  2. Pay your bills on time. This includes your credit card bills, mortgage payments, and other loan payments. One missed payment can wreak havoc on your credit score, so it’s important to make on-time payments a priority, especially if you’re trying to improve your FICO score. Set up automatic online reminders or payments so you never forget. If that’s not an option, set up manual payment reminders on your calendar. 
  3. Ensure all of your accounts with good payment histories are showing up on your credit history. For example, if your mortgage isn’t showing up on your credit report, call your mortgage servicer and see if they report to a certain agency. You can also submit certain information you’d like to be included on your credit report.
  4. Check your credit report. Common credit report errors can include missed payments, identify mix-ups and incorrect dates on payments do sometimes pop up on credit reports periodically. As well, compare your report with credit card statements and other financial documents, such as mortgage paperwork. Order a free copy of your credit report, too, (you get one report per bureau annually). That way, you can be informed of what’s on your credit report periodically throughout the year. 
  5. Consider using a credit-boosting tool like Experian Boost. This tool allows you to factor in utility and telecommunications bills into your credit file, which then gives your FICO score a little boost, hence the name. 

At 35% of your score, payment history is one of the most important factors of a great FICO score. Improve your payment history by making all future payments on time and in-full, and ensuring that your credit report is accurate, or even using a credit boosting tool. 

Article Sources

  1. MyFico. "What's in my FICO Scores?" Accessed Nov. 25, 2019.

  2. MyFico. "Payment History," Accessed Nov. 25, 2019.

  3. Experian. "What is a Bad Credit Score?" Accessed Nov. 25, 2019.

  4. Experian. "Can I Add Good Payment History to my Credit Report?" Accessed Nov. 25, 2019.

  5. Consumer Finance Protection Bureau. "What Are Common Credit Errors I Should Look for on My Credit Report?" Accessed Nov. 25, 2019.