VantageScore or FICO, paying on time counts a lot towards a high credit score

Many people are understandably concerned about their credit scores. The credit score, while not the only thing a lender looks at when deciding whether to issue a loan, is certainly a big part of the decision process. And why not? It’s a simple distillation of a lot of complicated information, reduced to a three-digit number that a busy loan officer can assess at a glance. If you have a healthy credit score, more loans will become available to you.

The components of a credit score are complicated and involve a number of different parameters. But one thing sticks out more than anything else, and it counts for 35% of the overall score under the well-established FICO scoring system - paying bills on time. The one thing that concerns lenders and creditors more than anything else is the answer to the question, “Will I get repaid?” That only stands to reason. No one wants to lend money to someone if they think that they aren’t going to get that money back. This is taken into consideration when compiling the credit scores, and how and when you pay your bills gets a lot of weight.

It’s not just a matter of paying on time, of course. It’s also a matter of whether you pay in full or pay at all. When a lender looks at your credit report, he or she wants to see that you have a history of paying your bills. They want to see that you have paid your loans in full. They want to see that you have paid them on time. They want to see that you have paid “as agreed.”

If you have a history of paying late, this will adversely affect your score. On the other hand, it’s a fairly easy thing to fix, provided that you can devote a bit of time to it. You simply have to make sure that you begin, today, paying all of your bills no later than the day they are due. Watch out if you are paying your credit card bills; the fine print may stipulate that the payment must be in the company’s office by 10 AM or some such time. If the mail shows up at 11 AM instead, your payment will be considered late.

It is better to make a minimum payment on time than it is to pay it in full, but pay it late. Paying late invokes penalties and interest rate increases, and negative notations on your credit report. On the other hand, a year or two of paying all bills on time will add a significant boost to your score. It’s worth the effort, and with online bill paying becoming more common, it’s not even difficult. And the best part? Paying on time costs no more money than paying late.

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