What is payment history and how does it impact your credit?

When it comes to paying bills, timing is everything. That’s because your payment history is an important factor used to calculate your credit scores. Lenders and creditors use your credit scores to help determine your creditworthiness and make decisions about offering you things like credit cards, auto loans and mortgages. 

But what exactly is payment history? How can it impact your credit scores? And how can you improve your payment history? Read on for the answers to these questions and more.

Key takeaways

• Payment history can show how likely you are to pay back your loans and is an important part of calculating your credit scores.
• Credit scores help lenders make decisions about loan approvals, loan terms and more.
• Late, missed or delinquent payments can negatively impact credit scores and creditworthiness.
• You can improve your payment history by doing things like paying your bills on time.

Payment history can show how reliable a consumer is when it comes to repaying debt, and it can play a major role in lending decisions. Information about payment history is included in credit reports. And it plays an important role in determining credit scores, accounting for at least 35% of some credit-scoring formulas. 

As the Consumer Financial Protection Bureau (CFPB) explains, credit reports include financial information submitted by creditors like lenders and credit card companies. Within your credit reports, your payment history shows payment information about your credit accounts and might include things like:

• The accounts you’ve paid on time
• How long overdue your payments are—or have been
• Any past due items
• How long it’s been since you’ve had delinquencies, collections items or bankruptcies 

Remember, your credit scores give lenders an idea of how likely you are to pay back your loans. This is why your payment history is an important factor used to calculate your scores. And the better your payment history, the better your credit scores might be.

Keep in mind that there are many credit scores out there, each with its own scoring model. FICO® and VantageScore® provide some of the most commonly used credit scores. 

How those companies calculate scores may differ. But their calculations are based on much of the same information from your credit reports—including your payment history.

The types of accounts that can influence your payment history may include:

• Credit cards
• Installment loans like auto loans, mortgages and student loans
• Consumer finance company loans

Bankruptcies, wage attachments and lawsuits are also considered with your payment history and can negatively impact your credit scores.

If you’re wondering how long late payments stay on your credit reports, just know that if they’re reported to credit bureaus, it could take years to remove them from your credit reports. In fact, the CFPB explains that negative information can generally stay on your credit reports for up to seven years.

Some negative information—like bankruptcies, lawsuits or judgments against you—can stay on your report for even longer. But depending on the scoring model, older negative information may count less than more recent information does. And negative information with smaller dollar amounts could count less than negative information with larger amounts. 

Keep in mind, negative information like late credit card payments could come with other consequences, including late fees and interest rate increases. And if you don’t pay on time, you might not be able to use your card for new purchases until your past due amounts are paid. You should check your credit card’s terms and conditions to understand how you could be impacted by a late payment by your issuer.

When a credit card account goes 180 days—a full six months—past due, the credit card issuer may close and charge off the account. And some issuers may charge off overdue accounts sooner.

Charging off an account means that it’s permanently closed and written off as a loss to the company. But the debt is still owed.

If you don’t have the greatest payment history, you can always work to improve it. These tips may help.

Paying your bills may feel like a struggle when money’s tight. But sticking to a budget and paying your bills on time might help you get your payment history back on track. And setting up automatic payments is one way to ensure your bills are paid on time each month.

Remember, older negative information may affect your credit scores less than more recent negative information does. So the longer you pay your bills on time, the better it is for your payment history. And the better it could be for your credit scores. Making the minimum payment on credit accounts—like your credit card—over time may help keep your account current and in good standing.

If you’re struggling to pay bills, consider getting in touch with your lenders for help. Credit card companies, for example, work every day with people who can’t pay their bills. They may be able to work with you if you’re concerned you might miss upcoming payments.

And if you’re a Capital One customer and having trouble making payments, you should contact Capital One directly to discuss potential options.

Your payment history shows up on your credit reports and is a major factor in calculating your credit scores. That’s why it’s a good idea to regularly monitor your credit. 

While your credit scores may paint a general picture of your creditworthiness, a full credit report can offer much more detail. With CreditWise from Capital One, you can access your free TransUnion® credit report and VantageScore 3.0 credit score without negatively impacting your credit. And you can find out how your payment history affects your credit score and how it compares to the payment history of others.

You can also see the potential impacts of financial decisions on your credit score before you make them with the CreditWise Simulator. CreditWise is free and available to everyone, not just Capital One cardholders.