Missed Payments And Your FICO Score
If you know the FICO score calculation you will find the single worst thing you can do to your FICO score is to pay late. Your payment history accounts for 35% of your FICO score and 7 years of payments are taken into account.
Missed payment are judged based on three factors. The first is the severity. Basically, it comes down to how late were you when you finally paid the account. The longer it took you to get current the greater the negative effect on your credit score. The second factor is how often do you pay late. The more you pay late the larger risk you represent and the more it will hurt your credit score. The last factor is how recent was your last late payment. Since the FICO score formula gives more weight to recent events over the past, the more recent it is the larger the negative effect.
The question is if you have an excellent credit score will one payment really hurt your credit score? The answer is yes. The reason is the FICO score formula looks for any sign of distress. Since a person with excellent credit has one or none late payments a single late payment is a red flag. For a person that always pay late, they are already expected to pay late again. Well, not really but it carries less of an effect.
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Tags: FICO score
Posted in FICO score, Late Payments
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