Payment History: How Does It Affect Your Credit Scores?

Keeping up with your bill due dates can help you avoid late fees but it can also help you sidestep something else: credit score damage.

Both FICO credit scores, which are used by 90% of top lenders in borrowing decisions, and VantageScores include payment history as a factor. Paying late or worse, not paying at all, could have negative credit score consequences. If you plan to apply for credit cards or loans, it’s important to understand why payment history matters and how it can affect your credit scores.

What Is Payment History?

For credit scoring purposes, payment history simply means your track record of how you’ve paid your bills over time. Specifically, that means your payments for various types of credit accounts including:

Credit cards
Personal loans
Installment loans
Car loans
Lines of credit
Mortgage loans
Retail store credit accounts

Medical bills can also be reported to your credit history but typically, those will only show up if you’ve fallen behind and your account is delinquent. Rent payments can be included in your credit report if your landlord chooses to report them, but those payments may not impact your credit scores.

Creditors can decide whether to report your accounts to one or all three of the major credit bureaus. If they choose to do so, they can report:

On-time payments
Missed or late payments
Minimum payment due

Your credit reports can also show whether an account is being paid as agreed, how many overdue or delinquent payments you have, amounts owed on delinquent or collection accounts and any seriously adverse payment history, such as a foreclosure or bankruptcy.

Checking your credit reports regularly makes it easier to see how your payment history has trended over time. You can also check for any payment information that’s been omitted in error or reported inaccurately.

Payment History and FICO Scores

FICO credit scores are used by 90% of top lenders in borrowing decisions. These scores evaluate your creditworthiness based on five specific factors:

Payment history: 35% of your score
Credit utilization: 30% of your score
Credit age: 15% of your score
Credit mix: 10% of your score
Inquiries for credit: 10% of your score

As you can see, payment history accounts for the largest part of your FICO credit score. On-time payments can help build positive credit history while late or missed payments could cause you to lose points from your score.

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Payment History and VantageScores

FICO scores aren’t the only credit scores you can have. Lenders can also consider VantageScores, which were established as a joint effort between Equifax, Experian and TransUnion.

Compared to FICO scores, the VantageScore model treats payment history differently. It’s considered to be only “moderately influential” for scoring, with more weight given to credit utilization and your credit mix and experience.

That doesn’t mean that you don’t need to be as diligent about paying your bills on time; your payment history still carries weight with VantageScores. But it takes a backseat to how much debt you’re carrying compared to your credit limits and how extensively you’ve used credit before.

How to Build Positive Payment History

If you’re hoping to build positive payment history, the first step is having at least one credit account in your name. Opening a credit card may seem like an obvious choice but you could also use a personal loan to establish payment history.

Personal loans have a set payment amount and due date. If you’re making your loan payments on time each month and your account is reported to the credit bureaus, that can help improve payment history. You can double up on making on-time payments if you also have a credit card, but it’s important to make sure you can afford to repay both. Otherwise, you run the risk of falling behind on payments and losing credit score points.

Another way to improve payment history is to get caught up on any payments you’re behind on. For example, if you haven’t been able to pay your credit card bill because of a financial hardship, you could help mitigate the impact of late payments by getting back on a regular payment schedule.

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Your credit card company may offer a hardship program to help you get caught up. Or you could apply for a personal loan to consolidate your credit card balances and have just one monthly debt payment to make going forward. If you’re considering a personal loan to build payment history or consolidate debt, take time to compare rates and loan terms from multiple lenders.

Finally, you can work on avoiding any late payments in the future. Some simple ways to do that include automating bill payments and setting up bill due date reminders. These are small but important steps you can take to improve payment history and protect your credit score.

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Rebecca Lake

Rebecca Lake is a freelance writer specializing in personal finance, credit and debt. She’s a contributor to U.S. News and World Report, Forbes Advisor and The Balance and her work has appeared online at CreditCards.com, MyBankTracker, Money-Rates.com and dozens of other top publications.