By Sabrina Karl
Credit scores are an important tool used by lenders, credit card companies, and insurance providers. The higher your score, the less interest you’ll pay, the better card features you’ll be offered, and the more affordable your insurance premiums will be.
But the idea that we all have one credit score is far from true. First, there are two primary models of scoring, the FICO Score and the VantageScore. Second, there are numerous variations on those two base models, tweaked to prioritize certain factors above others depending on what the lender or institution finds most important. There are also three credit bureaus, who each decide which score to use.
As a result, there isn’t one singular answer to the question of which factor is most important. But, there is an answer to what has the biggest influence most of the time. And that answer is an on-time payment history.
The older and more established FICO score is used in an estimated 9 out of 10 lending decisions, with the VantageScore being much newer, established in 2006. So for any institution reviewing your FICO score — in other words, most of them — the factor that matters most is how often you’ve made your payments on time.
In fact, it accounts for more than a third of your score, at 35%.
Note that your score’s measure of on-time payments doesn’t include how much you’ve paid. It only measures how many months in the past you’ve made your required payments on time, whether that’s a fixed loan payment or the minimum payment required on your credit card.
Though you will suffer other financial costs for making only your minimum card payment, making every single payment, every month and never late, is critical to building a solid credit score.