Glossary of Business Credit Terms

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Trade Payment History

What is Trade Payment History?

Payment history is a systematic record of all the payments you make. This includes both late and on-time payments. Additionally, it also records instances of a missed payment. All these entries are recorded for both current and past credit accounts and encompass items like mortgages, line of credits, credit cards and personal loans.

How Is Trade Payment History Used?

Payment history is used as a measure of your trustworthiness in the eyes of potential lenders. It signals the likelihood of a borrower making his/her payments on time. For example, if you have a lot of late and missed payments, it might show a lender that you are likely to default on payments if a loan is issued to you.

Your payment history is also used to determine your credit score. In fact, it is one of the biggest determining factors of your creditworthiness. While the exact percentage of contribution isn’t known, its effect is still visibly more than other factors.

How Does Trade Payment History Affect Business Credit Score?

Payment history has a significant impact on your credit score since creditors always look at it to detect any missed or late payments. Both these instances may lower down your score. The further away your payment is from the actual due date, the more negative impact it has on your score.

However, just because you don’t have late or missed payments on your payment history doesn’t mean you will get a high score. Similarly, a single late payment won’t decrease your score much either.

How to Improve Your Credit Score with Payment History?

To improve your credit score via your payment history, you must avoid missed and late payments at all cost. Creditors tend to look at late payments as a determining factor, keeping in mind various things. This includes:

  • How many days after the due date, you make your payment, as shown via the payment history.
  • How recent was your last late payment? Let’s say; they are present in your history years ago. It won’t affect your score much.
  • Frequency of late payments. The more there is, the lesser your score.
  • Amount in question. The higher the amount you owed, the more the impact.
  • How much you owed. The more significant the amount, the greater the impact on your score.

To remove late payments from the payment history, to improve your credit score, you can:

  • Pen down a goodwill letter
  • File a dispute
  • Ensure future timely payments via autopay•

The Importance of Trade Payment History

As mentioned before, payment histories are essential because they govern whether or not you will get the financing you need. Based on your track record of previous and current payments, creditors may decide to grant your loan or reject it.

Types of Accounts on Trade Payment History

Here are the types of account present in a trade payment history.

  • Retail accounts
  • Mortgage loans
  • Retail accounts (store credit cards)
  • Installment loans

Negative items that may appear in the payment history include:

  • Wage attachments
  • Bankruptcies
  • Lawsuits

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