Payment history is the single most important factor in determining your credit score, making up 35% of the total. Since recent history carries more weight than what happened five years ago, getting in the habit of making on-time payments is an incredibly powerful way to start rebuilding your credit rating.
Likewise, delinquent payments can devastate your score. Missing even one payment can knock 50 to 100 points off a good score. Skipping payments for a single month on all your bills can lower your number from a respectable 707 to the dismal range of 562 to 632, according to the credit score estimator at Bankrate.com. The simulator lets you estimate your credit score and see the impact of various credit behaviors on your score.
Tip: I've found the best way to avoid late payments is to put as many of our bills on automatic as possible. Our mortgage lender, utilities and phone service providers are happy to take their payments directly from our checking account each month. Online bill-payment systems are another way to ease monthly check-writing chore, and many provide reminder services so you don't forget a bill. The latest versions of Quicken and Money have good reminder features, as well.