
They say you never get a second chance to make a good first impression but trust me, that’s not true for credit. Even if you’ve had some credit problems in the past, you can turn it all around. It just takes patience — and it all starts with making your next payment on time.
Lenders know how well you treat borrowed money because a substantial percentage of your credit score reflects your payment history. It is the single biggest factor in your score, and you get a chance to keep making a good impression on the credit bureaus each month.
Your payment history records every payment you make to a lender or creditor, including whether it was on-time or late, and significantly contributes to your credit scores.
The three major U.S. credit bureaus — Equifax, Experian, and TransUnion — partner with thousands of data furnishers to compile a record of your on-time (and late) loan and credit card payments, aka your payment history.
Credit scoring models like FICO and VantageScore produce credit scores based on your past financial behavior. I can teach you everything you need to know about payment history, but if you only take away one lesson from this article, let it be this: Pay your debts on time and you’ll likely be just fine.
Payment History and Your Credit Scores
They say the measure of your character is what you do when others aren’t around. That may be true but don’t ever think you’re the only person who knows whether you pay your bills on time.
Everybody who counts does, as you’ll see below. No matter how charming you are when applying for a loan, a bad credit score caused by a poor payment history is like a sign on your forehead warning lenders away.
Paying on time nets you better deals and opportunities moving forward. A history of payment struggles reduces your future access to reasonably priced credit and other financial conveniences.
Payment History as a Scoring Factor
Let’s dig a little deeper into the relationship between your payment history and your credit score. After credit bureaus get your real-time payment records from data furnishers, they turn them into exhaustive credit reports, which list the nitty-gritty details of who you pay and when.
To help lenders assess and compare prospective customers, they also evaluate and report their data according to various credit scoring models.
Most people are familiar with FICO, the most widespread credit scoring model. FICO is a company that produces many types of scores for general and specialized use in the lending industry.
Credit scoring models place the highest importance on payment history as a predictor of financial behavior.
FICO actually licenses its credit scoring models to the three U.S. credit bureaus — Equifax, Experian, and TransUnion. The bureaus have also teamed up to produce a rival to the FICO score, known as VantageScore.
Each is a three-digit number that grades your financial behavior, and each ranges from a high of 850 (signaling pristine credit) to 500 or even lower. Sophisticated analytics and research go into credit scoring models to predict real-world financial behavior with high accuracy.
FICO Score 8 Factors | VantageScore 4.0 Factors | |
---|---|---|
Payment History: 35% | Payment History: 41% | |
Amounts Owed: 30% | Utilization: 20% | |
Credit History: 15% | Age/Credit Mix: 20% | |
Credit Mix: 10% | New Credit: 11% | |
New Credit: 10% | Balance: 6% | |
Only uses five factors | Available Credit: 2% |
FICO and VantageScore take other factors into account, such as length of credit history and whether the borrower tends to run up high credit card balances. But both place the highest importance on payment history, with FICO weighing it at 35% and VantageScore considering it extremely influential (41%).
How Late Payments Impact Credit
Lenders are the biggest data furnishers for credit bureaus, of course. If you suddenly stop making payments on time, your lender will notice and take action, including reporting your payments to the credit bureaus.
There are lots of regulations around how and when lenders and collections agents can contact late borrowers. But trust me — if you’re late, your lender will communicate.
Let’s use the FICO Score model to describe the sequence of events related to late payments and their impact on your credit score, though the models work similarly. Be advised that every consumer has a unique financial history and status, and information about scoring models is anecdotal online because FICO and the bureaus tend to keep the details private.
- 30 days past due: Alarm bells go off. The lender issues your first past-due notice and reports your delinquency to the bureaus. Credit scores decline 60-100 points on average, although those with excellent credit could see their scores drop by as much as 90-110 points.
- 60 days past due: Another round of notifications and contact attempts ensues. Average credit scores decrease by 70-130 points.
- 90 days past due: Credit score damage ranges from 100-150 points. You’re approaching a point of no return where quickly recovering from the damage you’re doing becomes increasingly unlikely.
- 120-180 past due: Severe credit score damage occurs, often by as much as 100-160 points. Lenders usually attempt final contact or negotiations before declaring the loan in default and selling it to a collections agency. Scores can drop by at least 50 points — often by as much as 100 — when the bureaus receive notice of collections activity.
Types of Accounts Included in Payment History
We talked above about lenders being the biggest data furnishers to the credit reporting industry. We also covered how employers will occasionally pull your credit history to evaluate you as a person according to how promptly you pay your debts.
But we haven’t filled in the gaps and put the puzzle pieces together to really lay out the lending types those thousands of data furnishers report to the bureaus.
Not all types of debt have the same impact on your credit score. For example, medical debt on your payment history goes into default after 12 months instead of 180 days, and medical debts under $500 don’t show up on your credit report.
Revolving Credit Accounts
The bureaus tend to view a history of late credit card payments far more stringently and exert the maximum impact on your credit score. But there are other effects.

For example, cardholders who become delinquent on payments soon observe their interest rate rising significantly. Late fees are also standard.
Typical issuers charge around $25 to $40 when folks occasionally forget to make a payment. Naturally, repeat offenders pay more and just make a bad situation worse.
Your issuer will also slash your credit limit if you don’t keep up with your payments.
Not surprisingly, the self-defeating pattern can extend all the way to account cancelation.
Installment Loans
Installment loans include auto and student loans, where you repay a loan over time with interest. As with revolving credit accounts, the bureaus tend to treat late payments on installment loans with little leniency in terms of fees and penalties.

Lenders can also restructure delinquent installment loans to generate more potential revenue for themselves or make you pay other penalties. However, consistent payments on auto and student loans bring benefits beyond what you receive through keeping up your credit card payments.
A history of late mortgage payments tends to have the most impact on your credit score, followed by revolving credit accounts and installment loans.
Paying your car loan like clockwork keeps your car around to take you where you need to go instead of behind a repossession tow truck. Maintaining good standing with your student loan servicer guarantees access to deferment and forgiveness options and other potential benefits and savings.
Mortgages and Other Major Loans
Most advisors, including me, would recommend prioritizing your mortgage payment above your other debts.
A history of late mortgage payments may have a greater impact on your credit score than other debts. And you don’t want to risk foreclosure on your home and the resulting household insecurity.

That’s why I say that if you’re facing going in the red with debt, make an effort to do it in the least destructive way possible.
Nothing is certain in life, but don’t take on a house payment if you’re not confident in your ability to see it through.
As we briefly alluded to above, the debate around medical debt is shifting. The Consumer Financial Protection Board (CFPB) proposed in June 2024 to eliminate medical debt from credit reports.
CFPB research also suggests medical debt has less predictive value in credit reports than other forms of debt.
Tips for Maintaining a Positive Payment History
A loan default or home foreclosure can mark your payment history for up to seven years, affecting the cost of credit and products associated with your creditworthiness, such as utilities and insurance.
Employers are even known to pull credit scores from time to time. What do you think your current employer would think about a default on your payment history?

If you’re here because that’s the case, you’ve come to the right place. Regardless of your credit status, actionable information on improving your payment history and enhancing your credit scores is a matter of common sense. It all comes down to learning to pay your bills on time and sticking to it.
Your mileage may vary. What I want more than anything is for you to pick and choose strategies you know will generate the best outcome for you. Used correctly, these are pretty much no-brainers.
Setting Up Automatic Payments
You’re familiar with autopay, right? That’ll be your best bet in terms of setting yourself up for success because the credit scoring models love a consistent, lengthy payment history. Some lenders even offer discounts when you sign up for automatic payments.
I don’t care what the credit score model is. Put a long string of on-time payments in your history, and you’ll make everybody happy.
Review your payment history from the three credit bureaus: Equifax | Experian | TransUnion
But it’s not all sunshine and rainbows. You may have to delve into your lender’s website or app and configure your accounts to make the payments. And you’ve got to somehow keep up with your monthly autopay due dates and ensure you have enough cash in your accounts to cover the amounts.
There’s probably an app (or apps) for that. At least I hope so. But that’s another story.
Monitoring Your Credit Reports Regularly
The good news is that setting up automatic payments and paying your debts like a boss may motivate you to take better overall control of your finances.
Sooner or later — hopefully sooner — you may want to pull your credit reports and take a look at your payment history, which can be surprisingly inaccurate for many reasons.
Fortunately, that’s easy. Go to AnnualCreditReport.com to pull a free weekly credit report with your complete payment history from each of the three major credit bureaus.

The three bureaus operate the site. If you’re wondering why you can pull weekly reports at a site with “annual” in the name, it’s because you could only pull your reports once a year before the COVID-19 pandemic. They changed it during the shutdowns and the bureaus decided to keep it that way.
Start small and pull a report from your favorite bureau. Or just pick one. Then, navigate that bureau’s guidance and check your reports for accuracy against what you know to be true.
Soon, as you learn more, you may become one of those people who saves documentation for all their transactions and frequently checks all three of their reports.
Communicating with Creditors
And that may motivate you toward more intentional personal financial management overall. You’ll find yourself wanting to know and control more about what you have coming in and going out. You’ll find a budgeting method or app that you like.
Then, you’ll use your newfound knowledge to locate your financial pain points and even head off potential trouble by contacting your lenders proactively and explaining your situation.
Believe me — they’d rather work out a deal with you than watch your account go down the drain to collections. Get to know your creditors and let them help you. It’s a win-win.
A Good Payment History Shows You Are a Reliable Borrower
At the beginning, we talked a bit about what a positive (or negative) payment history says about you as a person.
Perhaps you should think about it in personal terms. Maybe a friend refuses to pay you back after you fronted him for lunch because his phone was dead. Be truthful with yourself. You might be wary of going out for another lunch.
That’s what a good payment history gets you: another lunch date with lenders who can potentially help you improve your life. Every consumer who uses credit and financial services needs to know what their payment history says about them.