One of the major factors that goes into determining your credit score is your payment history. This incorporates whether you consistently pay your bills on time, whether you default regularly, or if you have been in collections because you’ve never paid. Companies that you make payments to such as credit card companies, car loans, mortgage companies, and personal loan companies all record your on-time and default payments. These companies then submit that information to one or more of the three credit bureaus, Experian, Trans-Union and Equifax.
Once your payment history is given to the credit bureaus, that information along with several other data points are combined to determine your credit score. In fact, your payment history alone accounts for roughly 35% of your FICO score. That makes it the most important factor that goes into your score. The more on time payments you have, the better your credit score will be.
When it comes to payment history, not all payments are created equal. If you rent, your positive payment history for your rent may not get reported. Most likely, only if you’ve skipped out on paying rent or been evicted, will that negative information will show on your credit report. Your monthly cable and utility bills? Same thing, positive information is just not typically reported for these categories. So, when you’re starting out, how do you get those on-time payments to show up on your report? Use a company that reports positive payment history to the credit bureaus, not just negative.
A great way to establish positive payment history can be financing. For example, Credova reports both positive and negative information. With every on-time payment, you’re establishing a credit history that can help increase your score. When your credit score increases, you have a better chance of getting approved when applying for lines of credit. Using financing as a stepping stone is a great way towards improving your overall credit standing. Starting with smaller, manageable payments can assist you on your journey towards financial health.
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