By John Campbell

Your payment history is the single greatest factor used by the credit bureaus to compute your credit score. Your own personal history accounts for roughly 35 percent of your overall credit score.

Your payment history reflects every single payment you may or may not have made to any creditor listed on your credit report. To maximize your potential credit score you’ll want to pay all of your required minimum monthly payments on time. Even one missed payment can drop your credit score around 30 points. If you’re like most consumers, a 30 point drop could mean the difference between excellent and good or good and bad credit. A missed payment may also lower your credit score for up to 3 years, which could prove an eternity if you want to get a mortgage or auto loan within that time.

If you know of any debts you haven’t paid off, now may be as good a time as any to square away your unpaid debts. If you have any debts less than $10 you probably won’t find yourself dealing with a collection agency. However, any debt higher than that could come back to haunt you when you least expect it. Many businesses work directly with various collection agencies to recoup some of their losses caused by unpaid debts. If you’re lucky, you’ll receive a notice in the mail warning of potential collection action. If not, you’ll have no choice but to pay off a collection agency as soon as possible.

Any collection action against you will be listed on your credit report for 7 years, regardless of whether you’ve paid off the debt. It’s still in your best interest to get the debt paid off as soon as possible as a paid collection item looks much better on a credit report than a currently delinquent one. The same also applies for any judgments against you if you’re sued in civil court.

If you’re on the verge of defaulting on any debts and don’t know where you’re going to come up with the money to pay your next round of monthly debt payments, you should contact your creditors. Explain your situation and your creditors may be able to provide you with some temporary relief. They may be willing to lower your minimum monthly payment for a time or provide you with some other assistance if you can prove to them that you’re making an honest effort to pay off your debts. There’s no guarantee that they’ll help you, but it’s worth a shot. If all else fails you should try to contact a legitimate credit counselor to discuss your problems and see if you can get assistance in finding some solutions.

Anything you can do to keep from missing any payment on your debts will help you out a lot in a long run. The time and effort you put into paying off your debts now will help you get much better deals and interest rates from lenders. It’s an investment in your financial future that you’ll be thankful you made.

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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.