How Payment History Affects Your Credit Score
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Video Summary & Highlights
Payment history is the single most important factor in your credit score, accounting for 35%. Even one 30-day late payment can significantly impact your score (over 100 points) and take 9 months to recover. Late payments on mortgages take even longer to recover from (up to 2 years). Multiple late payments or severe delinquencies (90+ days) can take years to recover from.
While making payments on time is crucial, it’s not the only factor that affects your score. The other 65% of your score is determined by factors like credit card balances, credit mix (types of credit you have), age of credit history, and new credit inquiries.
Having few accounts can make your score more susceptible to damage from late payments. If you have a few accounts and one has a late payment, it will have a bigger impact compared to someone with many accounts.
It’s important to understand the reporting window for late payments. A late payment won’t appear on your credit report until you’re 31 days late. This means you have a grace period to avoid the negative impact by catching up before the 30-day mark.
The speaker, Derek Vogel, encourages viewers to manage their payments carefully and promises to cover credit cards in more detail in part two.
Source: creditabsolute.com