Payment History – Why It’s So Important?
Of the five categories that make up a FICO score, “payment history” is the one that carries the most weight. Specifically, payment history accounts for 35 percent of your total credit score, while amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit used (10 percent) round out the rest of what goes into your score.
But just why is payment history so important? Here’s a look:
- The whole point of a credit score is to inform a lender of whether you’re a reliable borrower. And a big part of being a reliable borrower is making on-time payments. That’s the biggest thing that the “payment history” category tells a lender — whether or not on-time payments have been consistently made on things like credit cards, retail accounts and loans.
- A common query many consumers have is whether a late payment here or there will harm their credit score. And the answer, in most cases, is no if your score is otherwise favorable. However, if you have regular late payments, credit repair is necessary. Luckily, in this case, it’s simple to repair credit — just make on-time payments.
- What’s in the score? Specifically, when it comes to late payments, a FICO score considers not just how many late payments there are, but how late they were, how much was owed and how recently each one occurred.