How Long Does Payment History Impact Your Score?

[Anonymous]

So basically I'm wondering how long good and/or bad payment history stays on your credit report/credit score. If I have 10 years of perfect payment history on 10 cards I would have 1200 perfect payments. If I miss one the following month I would then have 1211/1212 payment history. Is that right? Or does the count reset after a missed payment? So if I miss one after 10 years I would then be 11/12 for that month and after two months 23/24?

Does this make sense? I've been cooped up in the house for days now riding out the hurricane and I'm going crazy. Just trying to put my time to good use and learn a thing or two about credit. 

[Anonymous]

There's no real ratio or anything with respect to payment history and your score.  One person could have 4 accounts that they have perfect payment history on for 5 years and another person with 8 accounts clean for the same duration.  If both have otherwise identical profiles and they miss a payment on 1 account, their scores will drop equal amounts.  It won't matter that the one guy has twice the positive payment history (number of payments across twice as many accounts).  Payment history is either good (perfect, never late) or bad, meaning you've missed a payment in the last 7 years.  Late payments stay on your credit report for 7 years, so that's now long adverse payment history will impact your scores.

[RobertEG]

While % of timely payments might be one metric for scoring payment history, it is not the metric used.

The primary reason is that credit reporting is totally voluntary, and is not always done every month by each creditor.

Some only report when payments are missed, and some wait until derogs become major before reporting.

Stated differently, absence of negative items is not necessarily the same as reporting of no derogs.

Additionally, higher levels of delinquency have more impact than lower levels, and thus a simple % of timely payments would not represent that fact.

[Anonymous]

So basically if you have 10 years of perfect history and miss a payment it's almost the same as having a year of history and missing a payment?

[Anonymous]

Not quite.  There are two age related factors that the person with the ten year history could do well in that the person with the 1-year history could not:

Age of Oldest Account

Average Age of Accounts

An age of oldest = 10 years helps you out a lot more than an age of oldest = 1.

Similarly, an average age of 8 years (say) helps you out much more than an average age of 8 months.

These two factors to not belong to the Payment History category of the FICO score.  That's why the other contributors did not mention them.

[Anonymous]

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@Anonymous wrote:

So basically if you have 10 years of perfect history and miss a payment it's almost the same as having a year of history and missing a payment?

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In a nutshell, that's correct with respect to the "payment history" sector of the FICO pie.  Another thing you may find interesting is that it doesn't matter much if someone has 2 late payments or 30 late payments on an otherwise identical profile.  Their scores would be similar.  Why?  Because you're basically looking at black or white here, which is a "dirty" file or a "clean" file [with respect to payment history].  If you're clean your clean, so 1 year of perfect payment history verses 10 years of perfect payment history doesn't really matter.  Yes age of accounts is also a factor as CGID referenced above, but I'm talking just about payment history.  Similarly, if you're dirty you're dirty... so whether it's a couple of late payments or a high number of them, you're scored similarly.

[Anonymous]

Thanks BrutalBodyShots, that is all I wanted to know.

[Anonymous]

Good  Glad BBS was able to help.

It's just important that you realize that a person with ten years of history will typically have a much better score than a person with one year, as long as the two people have the same derogs: e.g. both have no derogs, both have one 30-day late, both three 30-day lates, etc.

[Anonymous]

Thank you. I realize that someone with more good history will have a better score due to other areas. I was specifically wondering how the payment history part of the credit score has an impact. Thank you for your help. 

[sarge12]

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@Anonymous wrote:

There's no real ratio or anything with respect to payment history and your score.  One person could have 4 accounts that they have perfect payment history on for 5 years and another person with 8 accounts clean for the same duration.  If both have otherwise identical profiles and they miss a payment on 1 account, their scores will drop equal amounts.  It won't matter that the one guy has twice the positive payment history (number of payments across twice as many accounts).  Payment history is either good (perfect, never late) or bad, meaning you've missed a payment in the last 7 years.  Late payments stay on your credit report for 7 years, so that's now long adverse payment history will impact your scores.

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I wanted to add that the impact of payment history also varies based on severity and how recent. 90 days late has more impact than 30 days late, and the impact will decline over time. A late stays on report for 7 years, but a late 5 years ago has less impact than a late 6 months ago.