How Does Payment History Affect Your Credit Score?

Your credit score tells more about you as a person than what you actually think. A bad credit reputation stains your credibility not only as a creditor but also as an individual.

Your negative credit standing can destroy you, your dreams, and your aspirations and leave you desperately fighting for monetary and economic salvation.

Many borrowers have fallen into their own unintentional death traps by having too much money at their disposal but having too little financial acumen to properly manage their expenses.

Living thriftily is not their greatest strength and eventually, this weakness stalks them and hunts them down like bloodhounds sniffing out a criminal in a dense forest.

Our blog today will explore how your credit score is affected by your payment history. We will also provide tips on how you can become a wiser borrower and a more intelligent financial manager so that your liquid assets will remain intact and well-attended for years to come.

Let’s get the ball rolling! Read on…

Payment History Defined

Payment history has nothing to do with national and international events, political upheavals, or even the order of things as society would deem it. It is almost certain that all of the mentioned instances have, to a certain degree, finances playing a major role in them.

Our blog, however, has no connection with any of the mentioned circumstances. Instead, it has something to do with you – that is, your financial records regarding timely payments (i.e. credit cards, loans, insurance, etc.) and past due payments (i.e. overdue payments, accumulated accounts for collection, unsettled medical bills, etc.).

We are going to explore ways to “re-write” your payment history and improve your credit score. Our blog will likewise show you great tips to properly commit yourself to fixing credit problems properly so that your financial credibility will stand out.

How to Improve Your Credit Score

We will not beat around the bush so here are our great tips to improve your credit score. Go through them and follow each of their advice to remedy your ailing payment history.

a. Your accounts must be in auto-pay – make sure your future bills settlements are
set to auto-pay. This is most helpful to people
who are forgetful or are unable to pay on their
due date because they cannot personally attend
to them.

b. Check with your creditors – make sure that you and your creditors are in agreement on
how you will pay them back. Non-reconciled credits will not
appear good in your credit report; hence, your credit score
will be affected as well as your payment history.

c. Settle credit demand letters ASAP – creditors eventually send out demand letters to delinquent
borrowers urging them to pay immediately. It is imperative
to settle these letters of demand since non-payment
will result in a negative mark on your credit history and score.

d. Settle late payments within the 30-day grace period – late payments are normal; however, if
this ends up cluttering your payment
records then you will have a hard time
fixing them. Not only do they damage
your character but also incur interests
making them more difficult to address.
This will also affect your financial credibility since personal loans with bad credit
will reflect how irresponsible you are with
your money and to your creditors.

Brief Overview on your Calculated Credit Score

Your credit score is unlike any score that only requires a series of accumulating numbers such that the competitor or party who rakes in the highest mark wins.

Credit scores are computed based on three elements; namely, interest, principal, and time.

We are going to delve into this right now:

a. Payment history (35%) – simply put: your payment history details your timely payments.
Unfortunately, both your late payments and accrued accounts
for collection are computed as well. This comprises 35% of your
overall credit score.

b. Credit utilization ratio (30%) – this comprises your available credit in current use. The higher
your ratio, the better your credit score. This comprises 30%
of your total credit rating.

c. Length of time to establish credit (15%) – this pertains to the number of years your credit
card account is in use. The more aged your card
is, the higher your credit ranking. This comprises
15% of your credit score.
d. Unadulterated credit accounts and inquiries (10%) – this pertains to lending institutions re-
questing or pulling a copy of your credit
report. Luckily, this has no effect on your
credit score. This comprises 10% of your
total credit mark.

e. Having mixed credit accounts (10%) – this pertains to you having multiple accounts open
or active at the same time (i.e. credit cards, multi-
purpose loans, credit lines, etc.). This tells creditors
that you are a diversified person in terms of your
finances – thus giving you a high score – and
increasing your credit score for getting a mortgage.

Final Thoughts

Credit score and payment history go hand-in-hand. Credit scores are affected by your payment history because your timely payments tell your credit score how responsible you are in settling your obligations.

There are tips we provided to help you understand what credit scores are and their relevance to your payment history. We also provided you with a bird’ eye view of how your credit score is calculated based on a number of factors that we enumerated in the latter part of this blog.

Remember that your actions and decisions regarding your money affect your plans in the future. If you are gunning for a mortgage loan then you have to iron out the kinks in your payment history and increase your credit score in order for you to proceed with your loan application without delay.


We are your best rebuild credit score agency in and around Canada. Our team of dedicated credit professionals led by our equally dedicated founder, Faizal Garasia, will assist in reforming your credit score in no time.

Contact us today at (647) 373-9651 or send an email to [email protected] for more information.

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