Your timely payment history has a 35% impact on your credit score. Paying debt on time and in full has a positive impact. Late payments, judgments, charge-offs, collection accounts and bankruptcies have a negative impact. If you have had any bankruptcies within the last 7 years, it will seriously affect your ability to borrow or establish new credit accounts. If you have had any judgments within the last several years, it is very important that you pay off the judgment and get a “satisfaction of judgment” from the court. Any unsatisfied or recent judgments will make a bad dent in your credit scores and adversely affect your ability to borrow. Usually, judgments and liens must be paid prior to the closing.
Timely mortgage payments are weighted heavily by the scoring systems and are one of the most vital requirements that lenders look for when evaluating your credit history. Many times, a single late mortgage payment within the last 12 months can hold up your file or make a big difference in your interest rate and loan terms. Your payment history on other debts (car payments, credit cards, etc.) is also given a lot of weight.
The credit scoring systems evaluate how many late payments you have had and whether they were 30, 60 or 90 days late, or whether they are currently in default, with default being the worst situation. Additionally, the systems look at whether the late payments were consecutive. If you only have one or two minor late payments on your report with no other derogatory marks, your score will not be terribly affected, but you will have a tough time getting over the critical 700 level. Here are four practical steps that you can implement to improve your credit score in this area:
- Make all your payments on time.
- Past dues on any account will destroy your score – bring your delinquent accounts current immediately.
- Pay your bills before they go to a collection agency.
- Regularly check your credit report for accuracy and make sure that disputed bills are not negatively affecting your scores.
Let me know if you have any questions or if I can help in any way!