Financial Tips From the FTC—Late Payments

Among the severe hits that your credit score can take includes the issue of late payments to your creditors.

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, according to Rebecca Kuehn, assistant director of the Division of Privacy and Protection for the Federal Trade Commission (FTC).

Lenders may be less likely to lend to you or may charge you a higher rate based on your payment history. Moreover, without your knowledge, in many states, a low credit score may have a negative impact on your auto insurance rate.

Depending upon your career path, poor payment history can also affect your ability to get a job. According to the FTC, employers often look at your credit report rather than your credit score during a pre-employment background check.

If you are attempting to find a job in industries including banking, defense, brokerage and other financial services, a poor credit report can preclude being hired in some cases.

The good news: The impact of this negative mark 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.