Payment History on Credit Report: #1 Impact on Score
Payment history on your credit bureau report is the single most important factor when it comes to good credit.
It’s important to pay your credit card bills on-time, every-time.
Why? Because payment history is the single biggest factor in your credit score. It makes up 35% of the credit bureau formula.
Credit bureaus know it’s hard to be perfect
This tactic sounds simple, but the credit bureaus know how hard it is to be perfect. They realize that everyone slips up from time-to-time.
Starting today, let’s make it a priority to always send the minimum payment before the statement due date. You can find the minimum amount due and the due date on the monthly statement. And you can check your payment history with a free credit report from a top credit bureau like Experian.
When does the credit bureau ding your score?
Never, never let the payment go 30 days past the due date, because that’s when the credit bureaus ding your payment history.
There is a small safety net in the system. Your bank may charge you a late fee on the first day after the payment due date. These fees are typically $28-$39, but they can be as high as $40-$50. The good news is that the bank doesn’t report a payment as being late unless it’s still outstanding 30 days after the statement due date.
The late payment that goes 30 days past the deadline is the one that will ding your credit score.
What to do when you miss a payment
Whenever you miss the payment date, call the customer service representative at the bank using the telephone number on the back of your credit card. They are trained to help you and will do their best to waive the late fee a few times a year. This call could save you as much as $90 to $100.
Then send the minimum payment as soon as possible.
You don’t want more than one or two late payments in a year. The bank could increase the interest rate on your account, which would cost you hundreds in additional interest payments.
Tricks to make sure you don’t miss a payment
We hear a lot lately about the millionaire mindset. What does that mean? Basically, it’s a fancy way of saying that rich people are disciplined with their money. You can be too!
Here are two tricks rich people use to protect their credit rating:
- Mark your calendar to remind yourself to send the payment at least a week before the payment due date. That way the bill gets paid, even if the statement gets lost in the mail. Unfortunately, you can’t blame the credit card company or post office when a bill doesn’t arrive on time. The fine print on the credit card agreement protects the bank. It informs the cardholder that the bank is not obligated to send a bill at all.
- Schedule a recurring payment, using your online checking account. This is a great way to take advantage of the extra features on a digital bank account. Set-up the monthly payment with a best guess estimate for the minimum amount. Bingo, you’re on autopilot and protected against late fees. It’s a good idea to send a second manual payment in addition to the automated minimum. The bank won’t mind getting two checks each month. You’ll pay off your debt faster and you’ll save on interest payments.
Summary of payment history on your credit report
I hope I’m not sounding like a broken record, but payment history is the single most important factor when it comes to your credit score. It makes up 35% of the credit bureau formula. That’s why it is so important to send the minimum payment, on-time each and every month. There are two easy tricks to keep you on track. Mark your calendar with the due date in case the bill gets lost in the mail. Or schedule a recurring payment with your online checking account, to make sure the minimum gets paid automatically, on-time each month.