How Much of My Credit Score is Based on Payment History?

The very basis of credit scores is for lenders to determine how likely it is that you will repay any money that they lend to you. A 'lender' can include anyone from a credit card company, to a mortgage broker, and credit union to a student loan office. All of these people look at your credit score to determine how risky it is to loan money to you.

Therefore, it makes sense that a significant portion of your credit score is based on your history of repaying debts. Although past performance is no guarantee that the future will be the same, it is a strong indicator of your willingness to manage your funds and stick to a budget.

It is logical that a late payment will affect your credit score negatively, since we have already agreed that past payment history is one indicator of the likelihood of you repaying a debt. The question is what is considered "late"?

To be technical, a payment is considered late if it is paid after the due date. However, for the purposes of credit reporting and depending on how late it is, a late payment only falls into one of four categories:

30 days late
60 days late
90 days late
120+ days late

As you might expect, as payment progressively becomes more overdue the impact on your credit score is greater. One 30-day late payment may ding your score a few points, but a payment that is 120+ days overdue will have quite an impact on your score. And multiple infractions of this type have a much greater impact.

What can you do to make sure your score isn't affected by late payments?

Obviously, paying your bills on time is the surest-method to avoid negative credit from late payments. However, late payments can and do happen for one reason or another. It is important that if you must be late on a payment that you are not 30 days (or more) late. There is an enormous difference in your credit between paying on the 29th day and paying on the 30th.

You should also make sure that any late payments reported on your credit are accurate. 79% of Americans have some kind of error on their credit report, so it is very likely that your report contains inaccurate information, which can include late payments that did not happen or aren't even yours!

Although 35% of your score is based on payment history, always keep in mind that it is not everything. If you ever find yourself afraid to open different types of credit accounts or wanting to cancel one of your older lines of credit because you don't remember to pay the bill on time, try to figure out a better way. In all likelihood, there is a way for you to pay on-time without sacrificing other aspects of your credit history.

Also keep in mind that the more recent a late payment is the more it affects your score. This makes logical sense as well since if you are getting into financial trouble (lost your job, too many bills, etc.) lenders will want to know about it sooner rather than later. If you got into trouble some time ago, but you have paid your bills on time since, then it is less likely that you are a current risk.