Why Are On-Time Payments So Important?

Your credit score is made up of a myriad of factors to determine your credit health. What role do on-time payments play in that formula?

The fact that paying your bills on time is crucial is a no-brainer, but it may be more important than you think. While your credit score is made up of a number of ingredients your payment history is a big part of that.

How Important Are On-Time Payments?

Your payment history makes up about 35 percent of your credit score - a huge amount! Your payment history also sticks around on your credit score so even one late payment can linger for a long time.

According to FICO one single 30-day late payment can drop a score of 780 90-110 points! That is a huge impact. The more late payments you have the more damage is done to your credit score and credit report.

Why Is Your Payment History So Important?

Payment history is important because it is an indicator of how reliable you are at repaying loans. Banks will only lend you money if you will pay it back and since they don’t know you personally they rely on your credit history to make that determination. If a bank sees that you have trouble meeting the terms of past arrangements they are more hesitant to lend you money or tack on an enormous interest rate.

A history of late payments can seriously affect your ability to get approval for a car loan or mortgage, which can hold your life back.

How Can I Improve My Payment History?

Working with a professional to review your past credit can be helpful in repairing your score. But the one thing you can do yourself is to be extra mindful of paying those bills from here on out. Eventually old mistakes will drop off and your score and report will more accurately reflect who you are now.

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