Figuring out exactly how credit scores work is problematic. Like nuclear fission, learning Chinese and setting the clock on your DVD player, credit scoring is not something that most people can easily master.
In the complicated world of credit scores there is one fact that pretty much everyone assumes is true: late payments are bad for your credit scores. Not only are late payments bad, but they are also assumed to be one of the worst things you could do to your scores. The first sign of a late payment on your credit reports signals impending credit doom, right? It turns out that this isnt exactly the case after all.
There are thousands of slightly different credit scoring models used today, each with a different purpose and formula. The most common credit scoring systems are set up to predict only one thing: how likely you are to have a 90 day late payment or worse in the 24 months after your score is calculated.
Credit scores are used by financial institutions, insurance companies and utility companies as an efficient way to predict how risky a customer you will be. If your credit score is low, it indicates that you are more likely to make late...