The Relationship of Your Payment History and Credit Scoring
By: Tony Francis
Submitted: 2009-11-05 07:06:27 | Word Count: 551
Credit scores are vital to every consumer who has a credit card. This is because of the fact that many consumers in America right now actually prefer to spend using credit cards rather than using hard cash. In this case, there are also many instances wherein many American consumers actually are not able to manage their respective credit spending. Usually, this fact leads them to have a bad credit score.
Truly, credit spending has enabled many American consumers to spend conveniently. However, this convenience also leads to the fact that consumers become too lax in their spending, and may find themselves buried in debt along the way. And having bad credit scores means that you are already in a financial quagmire.
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Here then are some facts concerning how credit scoring works. Take a look at these, and you may learn how to improve your credit score the next time around.
It is a sad fact however that most companies keep their credit scoring models secret from public. It is true that there is a law that protects American consumers from erroneous credit reports. However, this law does not mandate credit rating agencies to let their credit scoring models be known to people who use credit. In this case, there are still common indicators that may give consumers an idea of how their respective credits are scored.
One of such indicators is your payment history. Remember that your payment history is actually on of most referred to information by several credit agencies when scoring your credit. This is because of the fact that your credit history relatively shows if you are a responsible credit holder or not. In this case, when you have a good credit history, most likely, you will have a high credit score.
Of course, it also follows that if you have a bad credit history, then, you would likewise have a bad credit score. In cases wherein you actually have negative data on your credit history, such as paying late, there are three factors to be considered in scoring your credit:
1. Delinquency
This fact measures whether you are paying late or not. Of course, paying late also means being irresponsible, especially when credit agencies see it. Credit agencies would actually see when the last time that you paid late was. When a long time has passed since you last paid your bills late, of course, it would mean that you will have better credit scores. However, when the last bill that you paid was even paid late, low credit scores is likely an answer.
2. Frequency
On the meantime, frequency measures the number of times you have been paying late. Obviously, when you are regularly paying your bills late, you will have a lower credit score. However, when you are paying your bills on time, and you have paid late only once or twice, it would likely have a minimal impact on your credit score.
3. Severity
Of course, paying late also has varying degrees. It is true that low credit scores is an effect of paying your dues one month late. However, paying your dues 3 6 months late is a totally different case. Meaning, it may be common that many consumers pay their bills late, but some cases are more severe than other, which also deserve more severe credit scores.
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