Read the FICO Risk Factors located next to your credit score of a list of the items hurting your scores the most.

Expert Tip

Amount owed on accounts is too high

The FICO scoring system takes into consideration the amount you owe on all non-mortgage accounts. The more you owe the lower your score will be. this is not a factor that we see very often as the fico scoring system seems to be more sensitive to high revolving balances and others.

Amount owed on delinquent accounts 

If have accounts that are past due, your credit scores will suffer considerably. If you have any revolving, installment or mortgage accounts that are past due, this factor will certainly be one of the top reasons your scores are low. This is a major issue. Get current to improve your score.

Amount owed on revolving accounts is too high

This is one of the most common credit score issues. If you have high revolving balances, your credit scores will drop. It is best to keep balances under 10% of the credit limit. Zero balances on credit cards are also great for your score. Balance that exceed 50% of the limit are very bad for your credit score. The best solution is to pay down each revolving account below 50% individually. Start with the one that is cheapest to reduce below that 50% level.

IMPORTANT NOTE: You pay your credit cards off completely as soon as you get your bill?

The credit card companies typically report your balance in the middle of the month, not at the end of the billing cycle. Because of this, your credit card balances can still hurt your score even if you pay them off every month.

Amount past due on accounts

If you are past due on your payment on any type of account, your credit scores will reduce considerably. This is very similar to “Amount owed on delinquent accounts” as they both deal with past due payments. Knowing that there are two separate FICO factors for past due balance, we can determine that past due balances are extremely bad for your credit scores. Get your accounts current.

Lack of recent revolving account information

This might not seem like a major issue but it is. If you don’t have any open and active revolving accounts, your credit scores will be affected negatively. The FICO scoring system loves revolving accounts. LOVES revolving accounts. If you do not have a revolving account, the FICO scoring system will not love you. I have seen thousands of credit reports and only once have I seen credit scores in the 700s without an open and active revolving account. You must have open and active revolving accounts to have an excellent credit score. The solution is to open a credit card account (try Capital One if you’re rebuilding) or get added to someone else’s credit card as an authorized user. Another possible solution is to use an old credit card account that hasn’t seen any activity in a while. This could be an old department store charge card. This is a major credit score issue.

Length of time accounts have been established

Your FICO score takes into consideration your oldest account and your average account age. The older your accounts are, the better your scores will be. Also, new accounts will hurt your scores. People who pay their bills on time typically do not open new accounts very often and also keep their accounts open for a significant length of time. This is a major credit issue and I see this affecting peoples credit scores all the time. The best long term solution is to keep a hand full of revolving accounts open for the rest of your life. As these revolving accounts grow older, they will gain more credit score value. Avoid opening up new accounts especially if you will need your credit for something important in the following 12 months. Short term solutions are to use an old charge card that may be inactive due to non-use. Other solutions are getting added to someone else’s well-seasoned credit card account as an authorized user or paying for a seasoned trade line.   

Length of time revolving accounts have been established

Just like above, the FICO score will take into consideration the age of your revolving accounts. They will measure your oldest, newest and average age. Once again, keep your accounts open as long as possible (for life) and avoid opening new accounts. Solutions to this issue are to be added as an authorized user to someone else’s credit cards, buying a seasoned tradeline or just waiting until your open and active account are well seasoned. I don’t see this factor listed nearly as often as “Length of time accounts have been established”.

Level of delinquency on accounts

This is a major credit score issue. If you have late payments, your FICO score will consider how often you were late and how recent was the delinquency. Also, how late were you? Were you 60, 90 or 120 days late? This is an issue that will require time or credit repair to resolve. If you can remove the late payments and/or delinquencies from your credit report, your credit scores will increase.

No recent bank/national revolving balances

Once again, the credit scoring system loves credit cards and if you aren’t using them, your scores will be reduced. I don’t typically see this factor. Instead I see “lack of recent revolving account information” as being a very common issue. This issue is slightly different however. You can have open and active revolving accounts but if they all have zero balances; your credit scores will suffer. It is best to have zero balances on most of your credit card accounts but be sure to leave a little balance on one of the card to appease this FICO scoring gods on this issue.

Number of accounts with delinquency

This is a major credit scoring issue and seems to be almost identical to “Level of Delinquency on Accounts”. They are so sensitive to late payments that they listed it twice. This factor will consider number of late payments, how recent they are and how late the payments were made. The only solution is to avoid making late payments. Time will also soften the negative impact that a late payment will have on your credit score.

Number of accounts established

If you have too many or not enough open and active accounts, your credit score may be affected negatively. The FICO scoring system rewards those who have a moderate number of established accounts. How many is moderate? Well the average consumer has 3.5 credit card accounts. We recommend 3-5 because there’s always a chance that one of the credit cards companies can go out of business or you might just want to close it out because of a high fee or nasty customer service experience. If you only have a couple of credit cards, then you cannot afford the luxury of closing one of them otherwise your scores will drop. Having 5 open and active revolving accounts is certainly not too many.

Proportion (or ratio) of balances to credit limits on and/revolving or other revolving accounts is too high

the balances on your revolving accounts have a huge impact on your score. The credit scoring system sees this as a ratio of balance vs limit. If your balances are more than 50%of the limit, your scores will be reduced. The solution is to reduce as many of your revolving account balances below 50% of the limit. After you have done that you can work on reducing them to an amount below 30% and finally 10% of the limit.

Serious Delinquency

Late payments will hurt your credit score. You will see this factor listed several times here but with slightly different verbiage. The only solution is to pay on time and avoid late payments. Time will decrease the negative impact of late and/or delinquent payments.

Serious delinquency, and public record or collection filed

If you have a public record or collection and you also have a serious delinquency, your scores will be reduced. This is a major factor and is also very common. Paying off the delinquent accounts, collections and/or public records will not help resolve this factor. The fact that they are on your credit report paid or unpaid is an indication that you might not pay in the future.  Getting these items deleted from your credit report will help, otherwise time is the only solution.

Time since delinquency is too recent or unknown

If you have lates or delinquencies that are fairly recent, this can be an issue holding down your credit scores. The more recent the delinquency, the more of a negative impact they will have. This is a major issue that I see commonly on credit reports. I have seen delinquencies that were 3 years old and they were still considered too recent. Getting the delinquencies removed is the only solution unless you just wait for them to get old.

Time since derogatory public record or collection is too short

This is very similar to “Time since delinquency is too recent or unknown” except that it specifically applies to collections and public records. The recent collections and public records will hurt your scores the most. Over time, the impact will be reduced. Paying off the collection or satisfying the public record will have no impact on this factor.

Time since most recent account opening is too short

New accounts have no track record and are viewed as high risk. Also, the consumer who opens accounts often typically shows a pattern of non-payment. Therefore, opening new accounts will reduce your credit score. This can be a major factor and I see this very consistently. The only solution is to avoid opening accounts if possible.

Too many accounts with balances

The balances on your accounts have a huge impact on your credit scores, especially the balances on your revolving balances. This factor takes into consideration the balances on all of your individual accounts. The solution is to pay your balances down and keep them low. Since your credit card accounts will typically report your balances in the middle of the month, it is important to pay down your cards and avoid using them. If you must use them, try to keep the balance below 50% of the limit.

Too many inquiries in the last 12 months

This is almost always listed as a factor reducing your scores. There are many types of inquiries and they don’t all affect your scores. Only hard inquiries will hurt your scores. A hard inquiry is placed on your credit report when you apply for new credit. The FICO scoring system looks back 12 months for inquiries although your credit report may contain as little as 90 days’ worth of inquiry information or up to 2 years (hint, the credit report will always have 2 years of inquiry information but only show you a 90-day history of them). If you want the best possible scores, completely avoid inquiries if you can. Under 5 inquiries in the last 12 months is not really a big deal. Any more than that, you will see your scores drop. It is true that some forms of the FICO scoring system will treat multiple mortgage or auto inquiries made within a certain time frame as just 1 inquiry. The problem is that you will never know what type of FICO scoring system they are using at the bank. Auto dealers usually shop your loan to many banks and they might not all be using a scoring system that gives you that window of time to shop.   

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