Credit scores are one of the most elusive calculations to Americans in the modern financial world. Up there with income taxes in their complexity, understand one’s credit score and how it rises and falls is a common frustration for businesses and families alike.
Primarily citing the FICO score, used in over 90% of all credit and lending calculations, the factors that affect one’s credit score are broken down into five primary data points, each with their percentage of how much a score based on one particular point. We’ll start with the most pressing, and work our way down:
Payment History: 35%
Yes, you read that correctly. 35%, nearly half of the entire credit calculation, focuses on payment history. The single most important factor affecting one’s credit score is whether or not credit payments are made on-time, and in full.
Above all else, creditors care about getting paid. Like any investor, as soon as consistent payment cannot be guaranteed, just about everything else tends to fall through. Consequently, the best way to boost a credit score is simply to do everything in your power to pay in a timely manner, and the full required amount.
There is good news regarding this factor. Because creditors are looking for consistent payment, scores do not drop tremendously on a single missed or late payment. Credit card users can rest assured that a single mistake or accident in paying their bills will not destroy their credit rating. With that said, as soon as two or more mispayments occur within a relatively short period of time, scores are likely to tumble in a hurry.
Word to the wise: To boost credit, the single best thing to do is consistently pay debts on time.