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Your payment history is one of the most impactful parts of your credit score. If you miss just a few payments that are reported to the credit bureaus, the long-term ripple can hurt you for years.
In this article, we’ll cover the details of what your payment history is, how it is calculated as part of your credit score, and how to improve your credit score, even with a poor payment history in your past.
Summary
- Your payment history reflects on-time, late, and delinquent payments on many of your accounts
- Credit and retail accounts, car loans, and mortgage loans are the most common types of accounts that are part of your payment history
- Many factors impact your payment history, including how much time has passed since you missed a payment
- 35% of your credit score is based on your payment history
- There are several ways you can improve your payment history and boost your credit score
What is Payment History?
Your payment history is a running record of all the payments you make on your different credit accounts. Payment history includes late payments and on-time payments. Additionally, your payment history will reflect missed payments as well.
The different accounts that contribute to your payment history include retail credit accounts, credit cards, mortgage payments, car loans, and personal loans.
How Payment History is Calculated
One or two late payments usually isn’t enough to torpedo a credit score if you have a long history of on-time payments. The goal is to have a long-standing history of consistent on-time payments across multiple credit accounts.
Your payment history is generally made up of these accounts:
- Credit cards
- Retail cards
- Car loans or other installment loans
- Mortgage loans
Payments are considered late if they are 30 days past due. Credit bureaus will make a note if a payment is 30, 60, 90, or 120 days past due.
If an unpaid charge goes to collections or you file for bankruptcy, that also shows up on your payment history. These negative factors can drop your credit score and, in the case of bankruptcies, they will show up for 7 to 10 years.
Other factors that impact how your payment history is calculated
Calculating your payment history is more than making a list of the different accounts you have. The ways you made payments on those accounts also impact your payment history.
More factors that impact your payment history include:
- The number of past-due payments on your credit report
- How late your past-due payments are
- The amount of money you still owe on any delinquent accounts
- The total you owe on charges that have been sent to collections
- How much time has passed since past due payments or delinquencies happened
- How many accounts are being paid on time
Payment History Examples
It’s important to look at a few examples of how payment history is calculated.
Scenario 1:
Throughout the year, Claire pays her bills on time each month.
| J | F | M | A | M | J | J | A | S | O | N | D |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
The credit bureaus would calculate her payment history as on-time for the entire year.
Scenario 2:
Generally, Caden pays his bills on time. However, once in February he forgot a bill and paid 10 days late. It happened again in April. After that, he enrolled in autopay to make sure he paid all his bills on time.
| J | F | M | A | M | J | J | A | S | O | N | D |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
The credit bureaus are still going to record Caden’s payments as paid, not missed. Why? Because he paid his missed payments within 30 days and before the next payment was due.
Scenario 3:
Cadence is similar to Caden, with one big exception. Cadence also missed a bill in April. It wasn’t until the end of May when she was doing some tidying up that she noticed a pile of unopened mail. At the very bottom was April’s bill. She paid her bill right after opening the envelope, but it was already 30 days late.
| J | F | M | A | M | J | J | A | S | O | N | D |
| ✓ | ✓ | ✓ | X30 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Credit bureaus will likely record a X30 on her payment history to indicate that she had late payment that took more than 30 days to pay.
How Does Payment History Affect My Credit Score?
Before you can truly understand how your payment history impacts your credit score, let’s take a crash course in credit score basics.
Credit Score Basics
Your credit score is meant to help lenders get a snapshot assessment of how reliable you are when it comes to repaying debt.
There are several factors that impact your credit score. Some of the key factors include:
- Payment history
- Amount of debt owed
- Age of accounts
- Variety of credit types
- New accounts
Learn more about how your credit score is calculated here.
How Payment History Impacts Your Credit Score
Your credit score is made up of many different factors. Did you know that your payment history is one of the most important factors of your credit score?
In fact, when using the main credit score models, 35% of your credit score comes from your payment history.
This makes sense! Your credit score is supposed to indicate how reliable you are when it comes to repaying debt. So it’s logical that how you’ve handled debt in the past is likely to offer clues as to how you will pay off future debt.
How long does a late payment impact your credit score?
What if you have a negative payment history? Late and missing payments definitely ding your overall payment history, but they don’t last forever. Late payments can stay on your credit report for seven years.
Seven years might seem like an eternity. The good news is that the impact a late payment has actually decreases over time.
Consistency is key when it comes to payment history. After one to two years of consistency making on-time payments, the payment history portion of your credit score should be in really good shape.
How does bankruptcy or foreclosure impact your credit score?
Late payments can stay on your credit report for up to seven years. Bankruptcies and foreclosures can actually last that long or even longer.
Foreclosures, judgements brought against you, accounts in collections, and Chapter 13 bankruptcies stay on your credit report for seven years. Chapter 7 bankruptcy can actually last for 10 years.
How to Improve Your Payment History
Are you looking to improve your payment history? Try one of these six strategies to boost your payment history.
Choose your own due date
While you can’t adjust due dates for every type of loan, many times you actually can select your payment dates. If you are struggling with keeping track of your credit card bills, consider moving the due dates to line up with when your paycheck clears. Then, you can get in the habit of getting paid and pay your bills all within the same 24 or 48 hours.
Enroll in autopay
Automatic payments might not be for everyone, but most people can benefit from them. By enrolling in auto pay, you never have to worry about an e-bill going unopened or a snail mail snafu. Instead, autopay moves money from your savings or checking account and pays your bill each month.
Put it on your calendar
Whether you want to use a wall calendar, a planner, an app, or another reminder tool, take the time to create monthly reminders to pay your bills. Think of it as a failsafe to make sure you don’t have any missing payments.
Double check your credit history
Did you know that it’s possible to have errors on your credit report? It’s true! That’s why it is so important to make it a point to review your credit reports annually. If you notice an error on the report, you can flag it to have it corrected. If the error relates to your payment history, having your credit report amended is a quick way to improve your payment history.
Enroll in Experian Boost
Experian Boost is one of several tools that is designed to help you boost your credit score quickly. There are some payments you make that are not typically reported to the credit bureaus. That means that your payment history could be even better than it already looks to them.
Experian Boost works to quickly pull your payment history for your utilities, video streaming, and other bills that aren’t typically reported. Then, it shares that information with the credit bureaus. Your record of on-time payments with these companies can then boost your credit score!
Work with Your Creditors
You might consider working with your creditors to help improve your payment history. Sometimes interest charges take on a life of their own. If a lower interest rate would help you get ahead, ask your creditor to see if it is possible to lower your interest rate.
You can also consider working with a credit counseling service to consolidate your debts. Once your debt becomes more manageable, it’s easier to make on-time payments. The more on-time payments you make, the better your payment history becomes. That’s the goal, since a strong payment history is sure to have a positive impact on your credit score.
