Payment History is Key

Did you know your credit payment history is the most important factor in your credit score? Without a history of payments, it can be much harder to borrow money — even if you are in good financial standing otherwise. Lenders look for people they can trust to repay what they borrow, and the best way to prove it is to do it. Having just one account with a short payment history is enough to get you started building.  Once you’ve started you can add a couple more accounts and build your payment history over time.

It’s All About Consistency

Lenders prefer borrowers with a history of consistent and on-time payments. So, if you have a good track record of paying your balance every month, your score will reflect this good behavior, and you’ll have a better chance of being approved to borrow.

Borrowing money is a long-term transaction. This means any late payments will play a role in your credit score — but good payment consistency will help reduce the impact of your missteps.

How are payments represented in a credit report?

Credit reports technically track the status of your account, not your payments.  By making your payments on-time your accounts will stay in good-standing.  Each of your accounts will have a status for every month it was active showing whether it was “on-time,” “30 days past due,” “60 days past due,” “90 days past due,” “120 days past due,” etc.

An account may also be marked “missing” or “null” if no payment was required or the lender didn’t report to the bureau for that period. This may be the case if you didn’t use a credit card in a specific month, didn’t carry a balance from the prior month, and therefore have no outstanding balance due. Not to worry, this won’t hurt it your credit score… but it won’t help you build your credit either.

How long do payments stay on a credit report?

Late payments can remain on your account for up to 7 years, but most are only a very minor factor after just a couple years of consistent, on-time payments. Just because you may have had trouble making payments in the past doesn’t mean you can’t recover. Be patient and stay consistent and you’ll be on your way to improving your credit.

When do late payments show up on a credit report?

A lender may call your payment late after just one day, but they won’t report it to the credit bureau until your payment is at least 30 days late. So, even if your lender says a payment is late, you have time to repay before it affects your score.

Road to results

See how others improved their credit score.

Show Me How

How to Build a Solid Payment History

Paying on time starts with planning.

  1. Set up autopay. This is your best option and your best friend. Setting up automatic payments — even for the minimum amount — will make building credit much easier and keep you from missing payments or being late.  You can always make extra payments in addition to your autopay payments.
  2. Create calendar alerts ahead of due dates. If autopay isn’t an option, create alerts a few days before your payments are due so you will have enough time to pay them before they become late. Download the lender’s mobile app so you can pay directly from your phone when the reminder appears.
  3. Review your accounts regularly. Check your accounts regularly to make sure everything is accurate. If you’ve automated your payments, you’ll receive confirmation notices saying the money was received — that’s a great time to double check that everything looks good.
  4. Contact your lender if you can’t pay. Everyone hits bumps in the road, so if you think you are going to miss a payment, contact your lender. Explaining the situation to them may allow them to help you — especially if you’ve been consistent in the past.