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How Your Bill Paying Habits Have Impacted Your Credit Score

Learn how your payment history impacts your credit score.

Woman stressed about paying bills on time.
How payment history impacts credit score

Your payment history determines approximately 35% of your current credit score. The credit scoring model is looking to see if you have paid your bills on time in the past and if you are currently behind on any of your bills. Specifically, the score will calculate the total number of accounts paid on time and the number of accounts past due. Past due accounts will be rated by the amount past due, the length of time the account was past due, and how recently it was past due.

Late payments on certain types of accounts have more of a negative effect on you than others. In regard to applying for a mortgage refinance, late payments on your existing mortgage accounts are significantly worse than late payments on credit cards or installment loans.

Without a doubt, the most important debt to keep up to date is without a doubt your mortgage payment. Before you pay any other debt each month, make it a priority to pay your mortgage payment. Contact your loan servicer immediately if you feel you cannot make your mortgage payment.

Additionally, when you have a late payment on your mortgage it will affect the interest rate you are offered if you refinance. Why is this so significant? Lenders look poorly upon late mortgage payments because it indicates the possibility that they will not be repaid, and they will charge the borrower a higher interest rate to compensate them for this risk.

If you are close to being 30 days late on your mortgage (or any other debt reporting to credit), it's a good idea to pay by phone directly with the lender to ensure your payment is posted immediately. Otherwise, overnight your check to confirm receipt by the lender prior to being 30 or more days late. Be sure to confirm the overnight address - it may be different than the regular payment address.

Caution: One 30 day late can impact your credit for several years so any extra cost or inconvenience is well worth avoiding a late payment reported to credit.

IF You Are Currently Late:

If you have an account that is currently past due, your first step before you pay the amount owed is to contact the creditor and verify the actual balance due. Why is this important? Account balances are typically not accurate on your credit file. It is important to remember that recent past due balances can have a devastating impact on your credit score and should be addressed as quickly as possible. After this past due balance has been paid, and all of your payments are up to date, every possible effort should be made to make sure this and all other accounts are paid on time. This includes utilities and telephone services as well. A new late payment can reduce your credit score up to 75 points!

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