What Is Payment History?
A payment history is a critical determiner of whether a person or a business is a suitable candidate for a loan. It is a record of all timely, late, and missed payments on the credit accounts owned by the person or organization. These accounts include credit cards, personal loans, lines of credit, and mortgages. Even late utility bills, pending cable bills, and/or hospital bills can add negative implications on your payment history.
It also accounts for around 1/3 or 35% of your FICO credit score. In fact, if you are aiming to improve your credit score, paying your bills on time and avoiding delays is the best and the most easiest way to achieve the goal.
How Does Payment History Affect Your Credit Score?
Your credit score illustrates the lenders your likelihood of repaying the loan. The higher you score, the more likely you or your business have of availing loan on less interest and high credit limit.
When calculating the score, FICO and other credit bureaus take into accounts the following:
- How much new credit you have
- What types of credit you have
- How long have you had the credit
- How much you owe
- And how you will handle the credit in the future (also known as the payment history)
Although, having a good payment history does not define a high credit score, but as we mentioned above – it contributes significantly to the overall credit score.
Who Reports The Payment History?
The creditors are responsible for reporting payment history to the credit bureaus. These include Equifax, Experian, TransUnion, and Dun and Bradstreet. Most creditors take around 30 days to report late payments to the relevant bureaus. However, you can request the lenders to give you some extra time to pay your dues before they report your debt.
How Long Do The Late Payments Stay On The Credit History?
The information related to late payments stay on credit score for up to seven years. Incidence of bankruptcies, however, stays for around ten years.
Nevertheless, this does not mean you won’t be able to receive loans for your business or personal use for seven years. You will still be able to qualify but potentially with some limitations.
Can I Delay My Payment If I Am In A Financial Hurdle?
In most cases, the payments are deferred due to a financial crisis. If you are aware of your struggle on the monetary front and inability to pay the bills on time, immediately contact your creditor and explain your situation.
Be honest about the payment schedule you will follow in the future and if possible, pay a small amount as a proof of your good faith.
How To Make Sure Your Payment History Remains Intact?
Paying your bills on time is one of the best ways to remain on top of your payment history. Be responsible for your spending and make sure to balance your credit card and loan balances at a manageable level.
You can also sign up for credit monitoring service who will assist you in tracking and improving your overall credit report.