Payment history is a key factor used to measure creditworthiness because it shows how reliably a person has paid their debts over time. It is the largest component of credit scores, accounting for about 35% of the FICO score and up to 40% in some VantageScore models. Payment history includes information on whether payments on credit cards, loans, and other debts were made on time or late, how late any payments were, and whether there were any delinquencies, collections, or bankruptcies. Lenders use this history to assess the risk of lending money: a consistent history of on-time payments suggests a borrower is likely to repay debts as agreed, while late or missed payments indicate higher risk. A single late payment (30 days or more overdue) can significantly hurt a credit score and remain on the credit report for up to seven years, though its impact lessens over time. Payment history includes installment loans (like mortgages, auto, and student loans), revolving credit (like credit cards), and other financial obligations. Making payments on time every month helps maintain or improve credit scores, while missing payments can lead to penalties, higher interest rates, and difficulty getting new credit. Overall, a strong payment history signals lenders that a borrower is responsible and creditworthy, directly influencing lending decisions and terms.
