How Much Do Unpaid Bills Affect Credit Scores?

A FICO score is a three-digit number ranging from 300 up to 850 that represents how much of a credit risk you are to lenders. The lower the score, the greater the risk. The score can impact your life in several ways, including how much interest you're charged on a loan, the rates you're offered by an insurance company and which jobs you can qualify for. It's important to understand how unpaid bills affect your credit score.

Basics

Your FICO credit score contains five key components. According to FICO, 35 percent of the score reflects the payment history on your credit accounts, 30 percent is the amount of debt you have on those accounts, 15 percent is the length of your credit history, 10 percent is the amount of new credit you've applied for and the remaining 10 percent is the mix of credit types present on the report.

Significance

At 35 percent, payment history accounts for the largest component of your FICO score. How well you pay your bills will have the greatest impact on how high or low your score is. Late payments will drop your score. According to MSN Money, one 30-day late payment can drop your FICO score anywhere from 60 to 110 points, depending upon what score you had prior to the appearance of the late payment on your credit report.

Consequences

Unpaid bills can affect your FICO score in other ways as well. Creditors often turn delinquent accounts over to collection agencies. The agency will place a collection account on your credit report. FICO includes the presence of collection accounts in the calculation of your FICO score. Collections are considered negative items and, as such, these types of accounts will damage your credit. How much the score falls will vary according to the other information present on your report.

Federal Law

Creditors report late payments in increments of 30. A 30-day late notation on your report indicates that the account is one month behind. A 60-day late notation means you are two months past due, and so on. Once an account reaches 150 days late, the creditor may charge off, or write off, the debt as a loss. The later the payment, the more damage it will do to your credit score. Under the Fair Credit Reporting Act, late payments can remain on your credit report for up to seven years.