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;
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.
Collections 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 – Payment History (2 of 6)