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How does payment history affect your credit score?

This all-important credit scoring factor lets lenders know how likely you are to pay back what you owe


Payment history is the most important factor in your credit score. Simply put, if you pay your bills on time every time, your score should be in good shape.

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Understanding payment history and how it affects your credit score is essential to maintaining good credit.

In this article, we explore what payment history is and how it affects your credit score, including how late payments can damage your score, the importance of paying or settling collections and the impact of charge-offs.

We also provide tips for improving your payment history, such as setting up autopay or calendar reminders and using credit-enhancing tools to help. Read on to learn more about how payment history affects your credit score.

What is payment history?

Payment history is the most important factor in determining your credit score. It is a record kept by the three major credit bureaus that details your history of paying bills. Your credit report includes information on a wide variety of accounts, including:

  • Credit cards
  • Retail accounts
  • Installment loans
  • Finance company accounts
  • Mortgage loans
  • Collection items

The payment history of these accounts is used by prospective lenders to determine the likelihood that you’ll pay back what you owe — or if you’re at risk for default.

How payment history affects your credit score

Payment history is the biggest factor that influences a credit score, accounting for 35 percent of your score under FICO’s traditional model and treated as “extremely influential” under the VantageScore model.

Missing a payment can have a serious impact on your credit score, no matter what it is for. If a late payment is not paid within 30 days, it will appear on your credit report and can lower your score. According to FICO, a missed payment can result in a score drop of up to 80 points or more, depending on your current credit standing. Once the missed payment information is posted, it can stay on your credit report for up to seven years. You may also have to pay late fees and the credit card issuer may impose a penalty APR on your balance.

When assessing your payment history, FICO takes the following factors into account:

  • The individual payment histories of your credit cards, loans, and any other debts 
  • The amount of time that an account has been delinquent
  • The amount of the debts you owe 
  • The number of accounts that are paid and in good standing
  • The number of adverse public records and accounts that remain unpaid and delinquent

How do collection items affect your score?

Collection items — the result of a lender or credit card issuer employing a third party to collect a severely delinquent debt — can have a profound influence on a credit score. Accounts sent to collection agencies will be reported as overdue payments and will have a negative impact.

Paying or settling a collection account is a wise decision, both for your credit score and your financial well-being. It will end harassing phone calls and collection letters, and will also prevent the debt collector from suing you.

Once the account in collections has been settled, the debt collector will update your credit reports to reflect this. Newer credit scoring models such as FICO 9 and the two newest versions of VantageScore (3.0 and 4.0) will ignore collections that have a zero balance. Older models such as FICO 8 may not ignore a paid collection, but prospective lenders may see it as a positive that you ultimately paid back what you owed.

Those who have accounts in collections will most likely have lower credit scores as a result. If this applies to you, there’s not much you can do to increase your score in the short term. Your goal should be to pay or settle collections, not for any impact on your credit scores, but for the peace of mind of knowing you took care of your debts.

How do charge-offs affect your credit score?

A charge-off is a serious negative event in a credit history that can lower credit scores and limit eligibility for new loans or credit.

Charge-offs occur when an account is 150 days past due and has been written off as uncollectible. The number of points lost will depend on the scoring system used, what the score was before the entry and how many other negative entries appear on the credit report.

The appearance of a charge-off might not lower your score much because it would have already been degraded by late and missed payments. Charge-offs will stay on your credit report for seven years.

How to improve your payment history

Since payment history is a significant part of your score, it’s important to do what you can to keep yours positive.

Here are some ways to improve in this category:

  • Always pay your bills on time. Set up autopay or calendar reminders to ensure you never forget when your payments are due.
  • Avoid underpayment. Always pay at least the minimum due on your credit card statement. If possible, pay your balance in full every month.
  • Use credit-building tools such as Experian Boost. If you have a solid record of paying utility and cell phone bills on time, Experian can incorporate the information into your FICO credit score, which can lead to an increase in your credit score. Experian Boost is a free service, but it only affects your Experian credit score.
  • Contact your issuer if you’re in a bind. If you can’t make the minimum payment on your credit card account on time, ask your issuer if your due date can be changed. If you’re struggling due to an unexpected event such as a job loss or a medical emergency, ask your issuer about its financial hardship program. It may be willing to grant you a reprieve if you have a valid reason for not paying on time.

Bottom line

Payment history is a big factor in determining your credit scores. By paying your bills on time, every time, you can send a positive message to anyone who reviews your credit report.



We’ve replaced phrases that were not entirely original.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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