Credit Scoring - Payment History (2 of 6)

By
Real Estate Agent with KW Hometown 1756879

The most important factor regarding your credit score is your payment history.  Your ability to pay your accounts on time reflects 35% of your credit scores.  The credit scoring model certainly wants to know that you are paying your accounts as agreed.  The last 6 months are the most important time frame.  As time goes on older accounts and reportings have less weight to your score.  Although many factors come into play, a very recent hit to your credit could drop a score 50+ points

A credit report will usually show at minimum these catagories; credit pic

  • Past Due
  • 30-days late
  • 60-days late
  • 90-days late
  • Collections
  • Public Records, such as Judgments, Bankruptcy, Tax liens

Past due accounts are accounts that are 1 day past due.  They will negatively affect your credit score while the account shows "past due".  If the account reports as paid before hitting the 30-day mark, then the past due amount will not show past due, and you won't have a long term credit hit as you would for a 30+ day late.

Credit reports have no "memory".  It is snapshot of what appears at the time the report is requested. 

30-day lates and greater are more permanent dings to your credit score. The worse the late period the more damage it does to your score.  For example, a 90-day late is worse than a 30-day late.  Accounts that go beyond 90+ days may eventually show up as collections or judgments.

piggy bankCollections are among the worst for a credit score.  If you are looking to maximize your credit score, here is a rule of thumb.  Collections less than 2 years old pay off, as it should benefit your credit score.  Collections 2 years or older,  leave alone until you can pay them off at settlement (assuming you are buying a home).  Very Important - paying a collection over 2 years old will negatively hurt your credit score.  Essentially what happens is the account is brought to a current status, and as stated above, the more current the derrogatory mark, the more it hurts your score. In all cases, be certain to obtain proof of the account's pay-off in case it is needed in the future.

A few more notes regarding payment history ...

The highest weight is attributed to the highest pay account.  For example, a 30-day late on a mortgage for $2,000/month is worse for your credit score than a 30-day late on a JC Penney card for $10/month.  

Judgements, bankruptices, and tax liens do not keep you from purchasing a home.  Even someone in a bankruptcy chapter 13 can, with permission from the trustee, obtain a home mortgage.  For more information regarding judgments, bankruptcies, tax liens, and anything else regarding credit just call or e-mail me.  I have great respect for people who take the time to restore their credit, and I will do my best to help.  And if you are working hard to make it better, work equally hard to make sure you are doing it RIGHT! ~ Steve Kappre

If you missed the other installments on credit check out "Credit Scoring -What Makes Up My Credit Score?"

 Credit Scoring - What Makes Up My Credit Score? (1 of 6)

Credit Scoring – Payment History (2 of 6)

Credit Scoring - Balances (3 of 6)

Credit Scoring - History (4 of 6)

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Diane Bell, Hilton Head Real Estate, Bluffton 01/30/2009 11:09 AM
  2. Josh Campbell 06/20/2009 07:47 AM
Topic:
Lending / Financial
Location:
New Jersey Gloucester County
Groups:
Realtors®
South Jersey
Christian Mortgage and Real Estate Professionals
All About NJ Real Estate
Gloucester County, NJ
Tags:
credit repair

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Rainer
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Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

Hey, Steve. I'm sure a lot of that will be an eye-opener for a lot of people.

Oct 24, 2008 05:46 AM #1
Rainer
37,061
Marie Ogle
Mortgage Processing Solutions - Spokane, WA
Contract Mortgage Processor

I thought I knew a thing or two?  Thanks for helping me be more informed and more knowledgeable.

Jan 27, 2009 04:45 AM #2
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Rainer
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Stephen Kappre

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