Payment History: Brief Synopsis
- Payment History is the highest weighted FICO factor.
- The more late payments there are on a profile, the worse its score.
- This section also considers collection accounts, charge offs, repossessions, judgments, tax liens, foreclosures, and bankruptcy.
Payment History: Full Explanation
The most important factor affecting a FICO score is the payment history of the consumer. This history carries a lot of weight: 35% of the total score, as seen on the FICO chart. Remember that the purpose of the FICO model is to predict whether or not a consumer will be a ’90 day late’ payer. As you must have guessed, a major indicator that someone might be a ‘late payer’ in the future is if they have paid late in the past!
The goal here is obviously to have as few late payments as possible. An ideal consumer would have no late payments on their credit report. However, ‘late payer’ is not simply one category. Rather, the model doesn’t just look at IF you have late payments, but also HOW MANY late payments there are. Some consumers neglect to make payments on time because they think they are already in the one ‘late payer’ category. This is simply not true! The more late payments you have, the lower your score will go.
If you take a look at your credit report, you will see that there is usually a summary of late payments. There will be a count of how many accounts were paid late in different time periods (30 days late, 60 days late, 90 days late etc.). Obviously, you want to keep these counts as low as possible in each time category. If you have late payments, make sure to make your payments on time from now on to avoid racking up further counts in this area!
This section is all-inclusive. Many consumer think that only credit card late payments are recorded. Again, this is simply not the case. Late payments can take many shapes and sizes. Late payments on any kind of credit line, even a mortgage or a loan, will hurt you in this section! If you have late payments, collection accounts, charge offs, repossessions, judgments, tax liens, foreclosures, or bankruptcy items – then this is the section where points will be deducted for them.