Chris O'Shea
Your ability to pay your bills on time is a huge component of your credit score. It’s the largest component.
Score Breakdown of Payment History
The largest single contributing factor is payment history. It is made up:
- 35 percent of a FICO score
- 40 percent of a VantageScore*
That means if you’re late on payments, your score will take a beating.
Score Impact
Here’s what you need to know about how missed payments impact your credit score.
Payment Amount
Typically, the larger the payment amount and total balance of the debt, the more a missed payment hurts your score. Bigger debts mean a bigger hit.
Type of Debt Payment
The type of debt has little to no bearing on how much your credit score is impacted. If you miss a payment on a credit card, it’s treated similarly to missing a payment on a car loan.
Duration of Late Payment
The longer you wait before making a payment, the worse it is for your credit score. Here’s a quick look:
Less than 30 days late. If you make a payment before it’s 30 days late, you may be good to go. Payments of less than 30 days late typically don’t impact your score.
More than 30 days late. Once you’re more than 30 days late on a payment, it is noted in your credit score, and your score could go down by as much as 180 points.
More than 60 days late. If you are over 60 days late, there’s a good chance that your debt is being sold to a credit collection agency. That agency will then stop at nothing to collect the debt. It can be quite miserable.
Credit Report Impact
Late payments can stay on your credit report for up to seven years. Yes, even if you end up paying off the debt completely. That’s why it’s important to always make payments on time.
Tips to Help
If you’re struggling to pay bills, set up reminders or auto-payments.
- Go through your budget and trim excess expenses.
- Direct some of that excess to bill payments.
- Do whatever you need to do to make payments on time.
There is Hope. Falling behind on bills can be brutal on your credit score. But if you have a simple plan in place, you can stay on top of your payments and watch your score steadily increase over time.
*based on VantageScore 3.0
