Are you familiar with what makes up your credit scores?  How you manage your credit usage and account history has a huge impact on your scores.  The top 3 numbers in the chart have the biggest impact.

Credit scores range from 350 to 850 points.  The higher the score, the lower the assessed risk you are to a credit provider, landlord, or possible employer.  Scores matter because when you need to borrow, you need to borrow.  The easier it is to do that the better.  Higher scores can reduce financing costs and can support more positive outcomes for employment opportunities or financial agreements, such as leases.

I’m glad to share information to use if your scores need some help now or in the future.  Some information will be counter to your common sense and therefore may be a surprise factor as you read!

Payment History: 35% – The beauty of paying on time

Late payments are reported to credit bureaus (Equifax, Experian and Trans Union) if posted to accounts more than 30 days past the payment due date.  If a late charge has been paid, and the late payment posts within 30 days of due date, the account should remain clear of derogatory rankings.  A single payment posted more than 30 days past the payment due date can cause a sharp drop in scores.

If someone has financial difficulty and asks a creditor to accept less than the balance due as payment in full, and the creditor agrees, what results is a Settled Account.  The borrower gets some relief from debt, but other issues result:

  • Settled appears on the credit report for that account.
  • Settled means that the borrower caused a lender to have a loss and a new creditor may decline to extend new credit.
  • A new creditor will usually require that the borrower re-establishes credit history. How?  By obtaining 1 to 2 new credit cards, using them regularly and paying them on time for 1 to 2 years.

Collection Accounts:  These often occur due to medical bills not paid by insurance and you don’t know it, or a missed utility bill after moving to a new home.   If you discover an unpaid collection account – and if you know you will be applying for home, auto or other financing in the next 12 to 24 months – do not pay the collection account.  Why?

  • Collections, when entered in the credit system, cause a very sharp drop in credit scores.
    • Paying off a collection account will cause another sharp drop in credit scores due to recent activity on a derogatory account.

Amounts Owed – 30% of scores:  A focus on Credit Cards

Utilization is the percentage of credit card limits used.  Credit card companies usually report card balances to the bureaus monthly (reporting period).  Data reported includes high credit limit, current balance, payment history, number of months reviewed, and other information.

Utilizing 30% or less of card limits helps to keep scores higher.  Let’s say you have a $5,000 credit limit and charge $3,000.  This = 60% utilization.  Let’s say the payment is due on the 30th, and the company reports the balance on the statement date, the 20th.  You are 60% utilized as reported to bureaus and you pay in full on the 30th.   You are a good citizen because you do this every month, but your scores are perhaps lower than they could be.

Timing Tactic:  Use online payments to pay weekly or bi-weekly.  If you usually charge $3,000 per month, consider paying weekly charges in full or in part so that you maintain a running balance of less than 30% of credit limit, which is then reported to credit bureaus who issue the scores.

Length of Credit History – 15% of your score

The older your credit history is the better.  Acquire accounts, keep them and let them age.  When you close a credit card account you reduce the total credit limit available to you and utilization can be skewed in the wrong direction.  This can cause scores to decrease.

When you demonstrate handling payments over periods of time on multiple accounts lenders assess you as a better credit risk.  You don’t need 10 accounts.  Three to four with longer histories is fine.  On least used credit cards you can buy some small item in June and December, let the company bill you and pay them off on time.

I hope you find this information useful.  Please call with any questions or to learn about our complimentary financial analysis.  Advisory and investment services are available nationwide.


Ann Timoney

Personal Financial Advisor, CFP®

408-981-1335 C /

Ann joined Opes in 2004 as a Mortgage Advisor when the firm offered integrated mortgage, financial planning and investment management services. She was attracted to the opportunity to become a Personal Financial Advisor in 2006 to help her clients with their real estate decisions in the high-cost Silicon Valley area, and financial planning for their long-term goals.


Disclaimer: Client tax situations are unique and specific, and you are encouraged to consult a tax professional to analyze your specific situation.  This material has been prepared for informational purposes only, and is not intended to provide tax, legal or accounting advice; nothing contained in these materials should be taken as such. The opinions expressed in this article are not intended to provide specific advice or recommendations for any individual or on any specific tax strategy or security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Opes Wealth Management cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Advisory services are only offered to clients or prospective clients where Opes Wealth Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Opes unless a client service agreement is in place.