11/11/2020
Credit Tip: How Payment History Affects Your Scores
Pretty much everyone knows that your credit is affected by whether you make your payments on time or whether they are late. But most people don't know that your payment history only makes up 35% of your credit score.
While that may seem like a big part of your score (and it really is), it seems like paying your bills on time should give you a good credit score all by itself. Unfortunately, it only accounts for about 1/3 of your score. It is still the biggest factor used to calculate credit scores so it is the most important piece, just maybe not as important as it should be.
There are a few other things to know about how your payment history can affect your credit scores. One of them has to do with how these late payments are counted and what that does to your score.
It is probably pretty obvious that the more late payments you have, the lower your score will be; and the more on-time payments you have, the higher your score will be. But just because your payment is late, it doesn't mean it will go on your credit report or hurt your score
In order to be reported as being late on your credit report, your payment has to be at least 30 days late. In other words, if you pay your credit card after the due date and pay a late fee but still get them the payment in less than days after the due date, it should not affect your credit.
In fact, you could make your payment late every month and pay a late fee every month but still not have it affect your credit. Ideally, this doesn't happen because you would be wasting a lot of money on late fees. And some credit card companies will increase your interest rate and late fee if you make late payments.
To be on the safe side, it's always best to pay it earlier than the very last minute but it's good to know there is some leeway in case things don't go exactly as planned.
This is just one part of how your payment history affects your credit scores but it is an important one.
