If you have missed payments, get current and stay current: the longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report. And good FICO Scores weigh any credit problems against the positive information that says you’re managing your credit well.
The biggest chunk of your credit score is determined by how well you pay your bills each month; in fact, it accounts for a whopping 35% of your credit score! You’ll see this history listed on your credit report through different accounts you’ve had over the last seven years. Under every loan, credit card, or mortgage you’ve had, you’ll see how much you’ve paid each month for an extended period of time compared to how much the monthly bill totaled.
New credit tips: Re-establish your credit history if you have had problems: opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
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Even if you eventually catch up on what you owe, any payment that is more than 30 days late can appear on your credit report. However, some creditors don’t report the past due payment until a second payment is owed because they don’t want to upset good customers who simply forgot to the deadline and made it up the following month. Credit reporting rules do require that after a second payment is missed, all past due payments must be reported. Late payments or delinquent accounts may be reported for up to seven years after the date of the last scheduled payment.
Don’t Close Unused Credit Card Accounts – The age of your credit history matters, and a longer history is better. If you must close credit accounts, close newer ones. Be Careful Paying Off Old Debts – If a debt is “charged off” by the creditor, it means they do not expect further payments. If you make a payment on a charged off account, it reactivates the debt and lowers your credit score. This often happens when collection agencies are involved.