Which Accounts Most Affect Your Credit Score?

If you’ve checked your credit reports – hopefully you have – then you know that a variety of accounts are reported to the credit bureaus each month. Credit reports include credit cards, mortgage (if you own a house), auto loan (if you’ve borrowed money to purchase a car), student loans, or possibly even debt collections. One of those types of accounts has a bigger impact on credit scores, which are based on credit report information. Do you know which one? If you guessed credit cards, you're right.

Credit cards control a significant portion of our credit scores, according to a statistic from the Consumer Financial Protection Bureau’s recently released white paper on credit reporting. It’s not necessarily because credit cards are given more weight than other types of accounts, but because there are more credit card accounts present on credit reports than other types of accounts.

A Business Week article covering the CFPB’s white paper cites that 58% of the information on credit reports comes from credit card issuers. Another 13% comes from collection agencies, 7% from student loans, 7% from mortgage lenders, and the rest of the information comes from auto loans.

It makes sense: most of us probably have more credit card accounts than mortgages, student loans, or auto loans. We’re more likely to open up a new credit card account, because they’re relatively easy to get, can have lower monthly payments, and do not require a long-term commitment.

This newly released statistic shows just how important it is to manage credit card accounts wisely, and not just one or two of your accounts, but all of them. An isolated 30-day late credit card payment probably won’t devastate your credit score. However, several 30-day lates on multiple accounts will have more impact on your credit score, possibly more than a 30-day late on a mortgage account. Becoming 90-days delinquency on just one account can hurt your credit score severely.

Also alarming, a large portion of credit report information is supplied by just a few big banks. The research also reveals that half the information on credit reports comes from just 10 institutions.

If you’re having trouble managing your current credit cards, think twice about opening new accounts. The more balances, minimum payments, and due dates you have to deal with, the harder it becomes to keep up with your credit card payments and payments to other accounts. A few debt accounts are much easier to manage.

Federal law allows a dispute process for consumers to correct incorrect credit report information. Information from the credit bureaus indicates that most disputes are for collection accounts – which represent only 13% of information on credit reports. However, almost 40% of disputes involve collection accounts. Tradelines involving bank and retail cards receive the fewest disputes of all types of accounts.

We don’t know everything about how credit scores are calculated, but we do know that payment history is 35% of FICO scores and 28% of the VantageScore. If you want to protect your credit score, it’s important to stay current on all your payments, not just the payments on accounts you deem to be more important.

Sources: Business Week, Consumer Financial Protection Bureau