Paying your bills on time is one of the most important things you can do to raise your credit score. According to Experian, a whopping 35% of your score is determined by your payment history, and any missed payments quickly add up against you, lowering your score.
But with high inflation and rising interest rates, some consumers’ personal finances are suffering and impacting their ability to make timely payments.
Here are which late bills will affect your credit score the most and a few additional factors that could negatively impact your score.
1. Mortgage payment
Your mortgage payment is one of the most important bills you should pay on time. Credit reporting agencies give a lot of weight to this bill, because it’s typically a person’s largest payment each month.
Creditors often report a late mortgage payment 30 days after it is due, and the late payment stays on your report for seven years. The higher your credit score, the more dramatic the effect a late payment may have on your credit.
2. Car payment
This one is increasingly important for consumers to pay attention to now that the average new car payment is a staggering $725 per month, and delinquency rates are currently at 7.3% — above pre-COVID levels — and are estimated to peak near 10% in 2024.
As with a late mortgage payment, a late car payment will severely impact your credit. Each of the three credit reporting bureaus may calculate the change differently, but it won’t be good. Creditors will typically report the late payment when it’s 30 days past due, so if you’ve missed a car payment, it’s important to call your creditor immediately and make the payment.
3. Credit card accounts
Mortgages and car loans are considered installment loans because you borrow a large sum that needs to be paid back in set installments over a period of time. On the other hand, credit card accounts are considered revolving accounts because you have access to ongoing credit, according to Experian.
Despite the difference between these two types of accounts, being late on your credit card is still terrible for your credit score. Like mortgages and car loans, your credit likely will get dinged once your payment is 30 days late, so if you’re behind, you should make the payment ASAP.
Other things that affect your credit score
Paying your bills on time has the biggest impact on your credit score (remember, 35%!), but there are also other important categories you need to consider, including:
- Amounts owed: This is the amount of money you owe compared to the amount of credit available to you. For example, if you have a credit card with a credit line of $10,000 but only have a $500 balance on the card, your utilization would be very low — just 5%. Credit utilization makes up 30% of your credit score, and experts recommend you use 30% or less of your available credit — and closer to 10% is ideal.
- Length of credit history: The longer you have an account open, the better it can be for your score. This category accounts for 15% of your score, meaning that sometimes, keeping older credit card accounts open — even if you’ve paid them off — can be a good strategy for maintaining your credit score.
- Credit mix: Lenders and creditors want to see that you can handle different types of loans, so having a mix of credit cards, retail accounts, and installment loans can be beneficial. This category makes up 10% of your score.
- New credit: Credit reporting agencies take notice when you open multiple credit accounts in a short period, because too much new credit can indicate a risky borrower. This category accounts for 10% of your score.
If you’re having trouble paying your bills on time, check out The Ascent’s guide to paying off debt. And remember, if you’re behind on any of your bills, contact your creditor quickly to find out how you can get back on track before it reports the late payment to a credit reporting agency.
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