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How Payment History Affects Your Credit Score

How Payment History Affects Your Credit Score

Updated on January 18, 2023


There are many credit reporting agencies in the U.S., but Equifax, Experian, and TransUnion are three credit bureaus of major national significance. Though these three credit bureaus collect more or less the same information about individuals, your credit scores from Experian, TransUnion, and Equifax will typically vary.

Out of all the factors that different credit scoring models of these credit bureaus consider, your payment history is a common and crucial component in determining your overall credit score. As per the FICO scoring model, payment history accounts for 35% of your total credit score.

Other factors influence your credit score, but several missed or delayed payments can pull your credit score down. To better learn how payment history can impact your credit score, knowing what payment history is and what it consists of, and ways to improve your payment history becomes vital.

What Is Payment History?

Payment history on your credit report is evidence or record of all your previous and current payment behavior on your credit cards, loans, and all other credit accounts. It gives a snapshot to your prospective lenders about how frequently you borrow funds from any lending institution, do you repay on time, did you miss any of your payments, and so on. Not just lenders or creditors, potential landlords may also be interested in your payment history and your credit report as a whole to get a fair idea of how likely you are to pay the rent on time.

If you think a strong payment history is a key to a high credit score, you may be partially correct because it is not the only factor determining your credit profile. However, since it carries a high weightage in your credit score calculation, you can keep an eye on the components of your payment history that can help your credit score and hurt your credit score.

What Does Payment History Include?

Before understanding the components that determine your payment history, you need to know the types of Accounts that get reflected on your credit report. These credit-related accounts include Credit cards, Installment loans, Mortgage loans, Retail accounts that facilitate easy shopping, and Finance company accounts. Whether your payments are on time or late, these accounts are reported regularly.

Now coming back to elements of payment history, here are the seven components that make up your payment history as per the FICO scoring model:

  • Payment information of all the credit accounts
  • Amount of time elapsed since any current or previous account became delinquent
  • Amount of money owed on delinquent accounts or collection items
  • Total number of previous due payments on your credit report
  • Number of accounts in good standing
  • Current and past overdue payments

How Does Your Payment History Impact Your Credit Score?

A borrower's payment history is determined by the items reported to either one OR any two OR all three major consumer credit bureaus (Equifax, Experian, and TransUnion). The majority of the top banks and third-party services report your payments and rent payments to all three credit bureaus. Credit unions and smaller regional banks may only report to one or two credit bureaus. In contrast, some direct lenders and others don't report payments or missed payments. This is one of the reasons why your scores are significantly different across bureaus.

Because your credit score results from different information being reported to the credit bureaus, it can be challenging to ascertain to what extent your payment history affects your credit score. For instance, if you have a lengthy credit history with on-time payments, a single late payment may not affect your credit score. Also, your credit report only shows missed payments if they're at least 30 days late. On the other hand, having multiple late or missed payments on a single bill could dent your credit score.

In short, whether or not a late payment affects your credit score depends on how late you are since your payment was due, your score before being late on your payments, and how recent was your late payment. Apart from late payments, situations like charge-offs, bankruptcies, foreclosures, and so on in your payment history can potentially hurt your credit score.

Your payment history is the most dominant credit factor, so getting a good credit score with a miserable payment history can be challenging.

How To Improve Your Payment History

Although the process of fixing your bad credit score can take a pretty long time, you don't have to live with a poor credit score forever. You can check your credit report for FREE by visiting and know which category of your credit score needs improvement.

If you find out that your payment history is in bad shape and affecting your score, here are some tips that you can consider following to improve it:

Always Make On-Time Payments

This is a no-brainer tip but making your payments on time is one of the best proactive measures to build a strong payment history. Moreover, by making more and more on-time payments, you can diminish the impact of late or missed payments on your credit score. Another benefit of paying on time is a good credit utilization ratio, which can help boost your credit score.

Report Inaccurate Or Incomplete Information

You should make a point to regularly check your credit reports as it can help you spot any inaccurate or incomplete information that could be hampering your scores. Suppose any on-time payment has been represented as missed or late. In that case, you can initiate a dispute online or consider contacting both the credit bureau and the party who provided the information to the bureau.

Avoid Making Below-Minimum Payments

Paying less than the minimum amount on a bill may not give a good impression to your lenders as well. You might be able to escape late or missed payments, but it could be damaging. You should always ensure making minimum payments or even more significant than the monthly minimum before the due date to help keep your payment history clean.

Let Your Lender Know Your Situation

If you're worried about missing a payment during the repayment, you can consider discussing it with your lender. Not all lenders may be willing or able to help you, but some lenders help by adjusting your repayment plan if you let them know about your tight budget or difficult financial situation.

Adopt Smarter Payment Techniques

Remembering too many payment due dates each month can be a task. You can choose to schedule a single day for all bill payments or use automated payment methods that electronically transfer your bill amounts on their due dates. Setting up automatic payments can help you avoid being late for your bill payments or forgetting to make payments.

To Conclude

Since payment history holds the most significant share in your credit score, it has all the potential to increase or decrease your score. Building a good payment history requires considerable time, effort, and patience, but it can be advantageous. Your payment information can tell creditors that you are capable of paying your bills on time. This can help you get a loan online or offline quickly. Look out for factors that destroy the payment information on your credit report, and you might be able to protect your credit score, if not improve it.

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Harita Solanki

Harita Solanki is a passionate advocate for personal finance and believes in empowering individuals to take control of their financial lives.

Her expertise covers a wide range of personal finance topics, including budgeting, saving, credit, debt management, and retirement planning.

With over six years of dedicated experience in the finance industry, Harita has helped countless readers of CASH 1 Loans make informed decisions and achieve their financial goals.

As a dedicated writer, Harita has contributed to numerous financial publications, sharing her knowledge and insights to help readers navigate the complexities of personal finance.

Her writing style is approachable, concise, and tailored to the needs of everyday individuals looking to improve their financial well-being.