Credit scores of 800 and higher don’t just randomly happen. Reaching the top credit scoring echelon takes participation, diligence, discipline, and budgeting. Over time, managing bills properly and keeping debt under control adds positive history on your credit report, and builds up your credit score so that you enjoy a plethora of loan options, the highest limit offerings, and the lowest, most attractive interest options.
However, it’s easy to “set back” your credit score. Just a few mistakes that don’t seem like that big of a deal at the time can tank your credit score 100 points, or even more!
The easiest way you can derail your credit score is by paying your debt obligations late.
Situations that can decrease your credit score
It sounds simple, and it is. Perhaps you don’t even miss a payment, you just forget to make it for a few weeks. Or you write it out and and don’t send it in. Maybe your cash flow is short that month and you need to wait until your next paycheck clears. Perhaps an illness or costly home repair took they money you were going to use to pay the bill.
All of these scenarios can crush your credit score.
The credit scoring numbers
Within the credit scoring model formulation, payment history has the single biggest impact on the score, at 35%. This means there is no bigger way to make your score go up, or down, than paying your bills on time.
To understand this, you need to understand a credit score’s purpose. Credit scores predict the likelihood that you will make your payments on time. The higher the score, the lower the risk of loaning you money. If you pay every bill on time, over the months and years this raises your credit score into an attractive one. On the opposite end, playing fast and loose with your bill payment plan sets you up to suffer in mediocre-to-bad credit.