Our credit counseling and debt management services aren’t designed to improve one’s credit score, though they often have the side effect of improving our clients’ credit. We do educate consumers about how to improve their own scores through legal and appropriate means. This series will examine each of the five aspects of a credit score.
First up is payment history.
Your payment history is the most important factor in calculating your credit score scale, accounting for 35% of the total score. Obviously, your payment history will be negatively impacted by late or missed payments.
The payments referenced by this part of the score include the widest variety of possible debts, including credit cards, loans, mortgages, tax liens, court judgments, collection accounts, and more. If your wages are garnished to address an unpaid obligation, this impacts your payment history as well.
Aside from the late payments themselves, the length of time your payments are overdue will also affect your payment history, along with the amount that is past due and how recently your late payments occurred.
To make a positive impact on your payment history and potentially raise your credit score, the simplest advice is to make all of your payments on time. The more accounts that are marked “paid as agreed”, and the more on-time payments those accounts report, the better your payment history’s impact on your score will be.
That’s why our credit counselors focus on helping our clients find ways to make all of their credit debt payments, and it’s why our Debt Management Plan uses automated electronic payments to ensure that our clients’ payments are always on time. Improving credit is not a primary objective of our services, but teaching consumers to make timely debt payments gives them healthier credit for the rest of their lives.
Ultimately, there are no “tips” or “tricks” that can help you with this part of your credit score. Simply make all payments on time, avoid negative notations like collections and bankruptcy filings, and your score will steadily rise.
It’s also important to note that small delinquencies have a much smaller impact than they used to; if you have a single missed payment that is less than $100 mixed in with a lot of positive reports of on-time payments, that one missed payment won’t have a tremendous impact, if any.
This is especially true of 30 or 60-day late payments; as long as those debts are paid, they won’t have a lasting impact unless they are part of a larger pattern of missed payments. 90-day late payments are a more serious matter. Even after they are paid off, they will still be noted on your credit report for 7 years. Do anything you can to avoid being 3 months late with any payment if you want to protect this part of your credit score.
While credit is vital to one’s overall financial health, we stress debt reduction first. If you’re overwhelmed by financial obligations, your top priority should be to pay down existing debt, and worry about your credit history later. Find out more about our free credit counseling services.
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This post is part of the Credit Score Scale Factors, a series of articles and resources designed to prepare people to become informed and responsible credit holders. View the rest of the articles here.
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