Payment history is an important factor both in terms of your credit score and as a deciding factor for lenders and others who check your credit. Lenders may be less likely to lend to you or may charge you a higher rate based on your payment history. Even without your knowledge, in most states, auto insurance rates are determined largely by your credit score.

Poor payment history can also affect your ability to get a job. Employers usually look at your credit report, rather than your credit score, when they look at consumer reports (background checks) to build a picture of you, particularly if you are being considered for financial or higher-level jobs.

The good news:

The impact of this negative lessens over time. The formula goes something like this: One year out, late payments count as 93 percent negative, at two years, 60 percent; three years, 33 percent; and by four years it’s down to 22 percent negative. These are rough estimates.

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