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How does your payment history affect your credit score?

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Payment history accounts for about one-third of an individual's credit score, making it one of the most important factors when calculating the total score, according to Credit Karma. If a person has a very strong credit score, just one single late payment can drastically lower that score.

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Credit scores of all ranges are negatively affected by habitual late payments or any payment that is late for an extended period, warns Credit Karma. Late payments are reported to the three major credit bureaus when they are overdue for longer than 30 days. Such a report remains on a person's credit history for seven years, making it harder to secure certain loans. When other loans are approved, the interest rates can be considerably higher.

Late payments may also affect the interest rates on current debts, depending on the original agreement, explains Credit Karma. In addition to all of this, creditors often tack on high fees for late payments, even if they are fewer than 30 days late and have not been reported to any credit bureau. If a payment becomes overdue, the sooner the debtor can pay the bill, the less negative effect it is likely to have on that person's credit score. The longer an amount due goes unpaid, the more harmful the effect is on that person's credit score.

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