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Your debt payment history is the most important factor in your credit score calculations. If even one payment is missed by 30 days or more, your credit could take a hit. You can improve your payment history by setting up account alerts, making at least the minimum payment and more. Here's how to ensure your payment history is as strong as possible.
8 Ways to Improve Your Payment History
The following tactics can help maintain a healthy payment history, or restore one that's under the weather.
Always Pay on Time
There's no big secret to establishing a solid payment history. The key is to pay your bills on time, every month, without fail.
You can't take back any payments you may already have paid late by 30 days or more. Those will remain on your credit reports for up to seven years, but their negative effects on your credit score will lessen over that time.
If you stick to timely payments moving forward, your credit standing and credit scores will tend to improve.
Learn more: When Do Late Payments Get Reported?
Make at Least the Minimum Payment
Late payments are the biggest potential blemish in your payment history, but payments that fall short of the required minimum amount could also mar your credit history. It's better to pay something every month if you can't make a full payment, even if it's only the required minimum.
If you have trouble making your credit card payments, avoid using those cards and focus on paying down your balances, at least until the required minimum payment is within reach. On installment loans such as mortgages, car loans and student loans, if you're having trouble making your full payment, consider reaching out to your lender—ideally before you send in an underpayment—to see if you can work out new terms that lower your monthly obligation.
Should the lender approve a new financing arrangement, you'll likely pay more in interest over the life of the loan, but that could be a good trade-off for preserving your payment history.
Learn more: What Happens When You Only Partially Pay Your Debt?
Use Autopay
Most financial institutions let you schedule automated bill payments (autopay), which is a great tool for avoiding late payments.
Credit card autopayment options include:
- Making the minimum required payment
- Paying your statement balance
- Paying your balance in full
- Paying a set amount you designate, such as $500
Autopay can help you make sure you always cover your minimum obligation, and you can always make additional payments manually in addition to autopayments. Just take care that there are sufficient funds in the designated bank accounts used to make the payments so you don't overdraw your bank account.
Learn more: Can Automatic Bill Payments Help My Credit Score?
Set Up Account Alerts
Many, if not most, credit card issuers, student loan servicers and mortgage lenders let you configure reminders. Turning on these optional prompts can remind you when your payment due date is near, let you know your account balance, notify you of your minimum required payment and more.
If these tools help you avoid late payments, they're well worth the time it takes to set them up.
Keep Credit Cards Active
If you have one or more credit cards stashed away, unused, putting them to use in a prudent way can fortify your payment history.
Dedicating each unused card to a small, single recurring bill—a streaming subscription or a gym membership, for example—and also setting up automatic payments allows you to increase your volume of on-time payments without incurring interest charges.
Keeping cards active in this way has the added benefits of:
- Discouraging the issuer from closing your account for inactivity
- Maintaining your available credit amounts
- Improving your length of credit history
Learn more: Does Closing a Credit Card Hurt Your Credit?
Use a Secured Credit Card
If your payment history is limited because you're new to the world of credit, or if you have a spotty payment history you'd like to improve, smart use of a secured credit card can enhance your positive payment history.
You can get a secured credit card if your credit score is low, or even if you haven't yet established a credit score. When you open a secured credit card, you make a cash deposit that serves as some or all of your borrowing limit.
The card issuer will keep the deposit if you stop making payments on your account. But if you pay your balance in full every month, you'll accumulate on-time payments that can benefit (or help establish) your credit scores.
Learn more: Reasons to Keep Using a Secured Card After Improving Your Score
Consider a Credit-Builder Loan
The chief purpose of a credit-builder loan is generating positive payments in your credit history, but it has the additional benefit of helping you save a few bucks.
You take out a loan for a modest amount, typically less than $1,000 and, rather than giving you the borrowed sum, the issuer (often a credit union) places the funds in a special interest-bearing account. You can't touch the account until the loan is paid off, but if you make regular payments, the money (and accumulated interest) are yours—and your payments are reported to the national credit bureaus, adding to your positive payment history. To get the full benefit, be sure your lender reports payments to all three credit bureaus (Experian, TransUnion and Equifax); not all do.
Learn more: How to Get a Credit-Builder Loan
Dispute Misreported Late Payments
Review your credit reports carefully to check for inaccurate late payment information. If a payment you made on time is misreported as late (or if there's any other incorrect information on your credit report), you have the right to dispute the inaccuracy and to have the record corrected.
You may need to provide proof, such as a bank statement showing the date you made a payment.
Removal of any late or missed payment appearing on your credit reports will tend to benefit your credit scores, but the extent of any score improvement will depend on the rest of the entries on your report and how old the misreported payment information is.
Learn more: How to Check Your Credit Report and File Disputes
How Payment History Affects Your Credit Score
Payment history is the single biggest factor of your credit scores. It's responsible for about 35% of your FICO® Score☉ Θ and "highly influential" for VantageScore® credit scores, responsible for up to 40% of the score depending on the version of VantageScore credit score that's used.
Consequently, the practice that will do more than any other to promote credit score improvement is making your debt payments on time every month, without fail. On the other hand, a payment you miss or pay late can do significant harm to your credit scores.
For the purposes of credit scores, a late payment is one that's 30 days overdue—and the first time one shows up on your credit report, it can cause a major drop in your credit score. Late payments typically remain on your credit report for seven years, but their negative impact on your credit scores wanes over time.
While creditors don't report payments made a few days late to the credit bureaus, most will charge a penalty for missing the due date, so there's a financial incentive to make your payments on time as well.
Which Bills Count Toward Your Payment History?
Any consumer debts with payments tracked on your credit reports are included in credit scoring systems' payment history calculations. Even closed accounts are considered. These include both installment loans and revolving credit.
Installment loans, which you borrow in one lump sum and pay back over time, include:
- Mortgages
- Auto loans
- Student loans
- Personal loans
- Home equity loans
- Retailer finance plans
- Credit-builder loans
Revolving credit accounts, which allow you to tap into in varying amounts up to a set credit limit and then repay, include:
- Credit cards
- Home equity lines of credit (HELOCs)
- Personal lines of credit
- Secured credit cards
Do Non-Debt Payments Affect Your Credit?
Your history of paying bills other than consumer debts, such as rent and utility bills, typically does not directly affect your credit scores because they aren't usually tracked on your credit reports (with an exception noted below).
Non-debt payments can, however, impact your credit in some situations:
- If you use Experian Boost®ø®ø: This free feature of an Experian account allows you to share information for recurring non-debt payments so they can be included in your Experian credit report and possibly increase your credit scores. Eligible payments may include rent paid online, utility bills, cellphone bills and streaming services. Your on-time payments are factored into credit scores derived from Experian data, while late payments, if any, are ignored. Results can vary, but for many users, Experian Boost brings an immediate increase in FICO® Scores.
- If past-due bills are sent to collections: If you fail to pay any bill and it is turned over to a collection department or agency, a collection account may appear on your credit report and hurt your credit scores. Collection accounts show up on your credit reports for up to seven years from the date you missed the payment.
- If your landlord reports rent to the credit bureaus: Landlords can choose to report rent payments to the national credit bureaus. If they do, recent versions of the FICO® Score and VantageScore credit scores can factor those payments into your scores, with timely payments tending to benefit the relevant scores. In practice, however, few landlords report rental payments to the credit bureaus.
Learn more: Does Experian Boost Work?
Benefits of Paying Your Bills on Time
Consistently paying your bills on time has many advantages:
- Helps improve your credit scores: Making debt payments on time every month is a major contributor to building good credit. Doing so promotes steady credit score growth over time, which lenders view as evidence of your reliability as a borrower. As your credit scores improve, you can gain access to better borrowing terms and cards with attractive rewards programs.
- Avoids penalties: The fine print in your loan agreements and credit card contracts allows lenders to impose a fee if you miss a payment due date. If you pay up before you're 30 days late, your credit scores won't suffer, but your wallet could. It's far less costly to make your payments on time.
- Decreases anxiety: Unless you have a solid system in place to make sure your bills are paid on time, payment deadlines can seem to creep up on you, too often triggering a panic response or a scramble to transfer funds. Taking charge of your bills can make your life a little less frantic and stressful.
Learn more: How to Avoid Late Payments
The Bottom Line
A healthy history of on-time debt payments demonstrates financial responsibility, spares you the expense of late fees and benefits your credit scores. Paying all your bills by their due dates is a worthwhile goal. For added incentive, you can track the positive impact as you rack up on-time payments by signing up for free credit monitoring from Experian.
