One missed payment can trigger a major credit score drop, according to a report from LendingTree, an online financial services company.
The report found that consumers who missed even one payment had an average credit score of 553, far below the 700-range average for consumers with no missed payments. LendingTree said a single missed payment can lower a credit score by as much as 80 points.
Consumers with missed payments also had a much lower average credit limit—$6,822—compared with $20,387 for those without any missed-payment record, the report said.
Matt Schulz, a consumer finance analyst at LendingTree, said, “Payment history is the most important part of your credit score,” adding, “The essence of a credit score is evaluating the likelihood that a borrower will repay their debt on time.”
Credit scores are measured on a scale from 300 to 850.
The LendingTree research team analyzed data from 100,000 people with credit scores above 800 and found that all of them made on-time payments each month.
Experts say paying on time is the most important step in raising a credit score. Payment history makes up 35% of a credit score, and late-payment records remain for seven years. Keeping credit card balances low also matters. Lenders look at credit utilization—how much debt someone carries compared with available credit—and generally prefer it at 30% or less.
Melanie Musson, a financial expert, said, “Improving your credit score takes about three months. While scores improve slowly, consistent improvement can lead to a better credit rating within a year.”
BY YEONGCHAE SONG [song.yeongchae@koreadaily.com]
