Whether it’s a bad relationship, a big lie or a gas station hot dog, past mistakes can come back to haunt you. And, unfortunately, that also goes for financial mistakes.
Your payment history is the biggest factor that goes into calculating your FICO score: the number used by credit card issuers and other lenders, as well as landlords, insurance companies and even employers to judge how creditworthy or trustworthy you are. No one likes being judged, but your payment history makes up 35 percent of your score, so you’ll want to pay attention. Here are a few factors that determine your history.
Remember that shopping spree you went on three years ago that you couldn’t pay off? Any late payments on that account, as well as your payment behavior with other credit cards, installment loans and mortgages make up your payment history. If you were delinquent on any of those payments by 30 days or more, that’s included in your history for at least seven years – 10 years if it ended in bankruptcy.
The good news is, your payment history includes how much time has passed since those delinquencies. It also includes accounts paid as agreed. So if your financial behavior improves, that will work in your favor.
What if you’re only late once, though? We all make mistakes. But how much will that mistake hurt your score? It depends. Your credit score is based on information provided by creditors. Once you’re more than 30 days late, your missed payment is likely to be reported to the credit bureaus. A missed payment can drop your score anywhere from 60 to 110 points, depending on how high your score already is and how many other delinquencies you have.
Your best bet? Make sure history tells a good story. Always make your payments on time and in full.