Why has my credit score dropped 42 points after I recently delayed to pay my loan which I have since settled? Also, why doesn't my score increase as quickly when I pay off loans as it does when I miss a payment? - a borrower asks in a popular Facebook group about digital credit and loans.
Going through the answer comments that the borrower continues to get, it is clear that many of the respondents don't have the remotest clue as to what could have culminated to the situation the borrower finds himself in.
So, to answer the question, there are many factors within your credit history that affect your credit scores. The single most important indicator of credit risk is your payment history. A missed payment will have the greatest and longest lasting impact.
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The more recently the missed payment occurred, the greater that impact will be, and the more missed payments you have, the longer it will take to recover.
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But how does this come about?
Well, think about someone who has broken your trust. It takes just one action in one moment to lose your trust, but it could take weeks, months or even years of positive interactions to regain it, depending on what the person did to violate your trust.
How to Recover From a Missed Loan Payment
Paying the missed loan is the first important step in restoring your credit scores, but to offset the risk the late payment represented, you must continue to demonstrate a current history of on-time payments.
These on-time payments will add positive activity to help off-set the negative payments in your past.
After a some time it will become clear that the late payment may have been an anomaly in an otherwise pristine credit history, and your positive payment history since that time will offset any negative impact it had on your creditworthiness.