Following is a guest post by Spencer Ford, chief executive officer and wealth advisor at Conservative Financial Solutions. Greater Harrison Chamber members are invited to share their expertise. Contact the Chamber to learn more.

There are many reasons you may want to improve your credit score, and it is possible. It takes a little insight… To improve your credit score, you also need to know the five areas that make up your credit score.

The Five Factors that Determine Credit Score

The first is Payment History. This makes up the largest single portion of your credit score and
accounts for 35% of your overall score. Late payments are a disaster for your credit score, so be sure to make your payments on time. If you’ve gotten off track, get back on track as soon as possible. Otherwise, it is going to be very difficult to raise your score.


The second is Amounts Owed. This makes up 30% of your score. In addition to simply adding up the total amount of debt you have, this score also takes into consideration your revolving utilization. Utilization is the amount of outstanding debt on your credit sources like credit cards or home equity lines in relation to your overall credit. If you have a credit card with a $10,000 limit, and you put $4,000 on it, your revolving utilization is 40%. Even if you pay your card off at the end of each month, that revolving utilization is reported. Your utilization matters both overall and per credit source. If you want to improve your credit score, you’ll want to consider lowering your revolving utilization. Maybe you can increase the limit on your card to $20,000. Now if you use $4,000 a month, your revolving utilization is only 20%. It’s recommended to keep your revolving utilization below 30%, but the highest scores typically have a 10% or less utilization rate.


The third category when determining your credit score is Length of Credit History which makes up 15% of your score. What are the ages of your accounts? What are the average age of all of your accounts combined? How long has each individual account been opened? When was each account last active? All of these questions matter when determining length of credit. If you have no credit history, you might consider getting a credit card. Charge a little each month keeping your revolving utilization below 30% and making sure you pay it off each month. There’s no reason to rack up debt to improve your credit score.


The fourth category is New Credit. This makes up 10% of your credit score. When you apply for new credit, whether that be for a new credit card, loan, or line of credit, the lender checks a copy of your credit report. This is known as a hard inquiry, and it appears on your credit report for 24 months. Some hard inquiries may hurt your credit score for up to 12 months, but other way be ignored. Here’s a tip. If you know you are going to be shopping for multiple loans, bunch them together. For example, if you are applying for a new credit card, but you also know you will be refinancing your house, applying for student loans, or even an auto loan, plan ahead, so you can keep your rate shopping within 30 days. You want to make sure that inquiry made for one potential lender doesn’t lower the score the next lender might see. FICO scores ignore inquires made 30 days prior to scoring. However, some older scoring models only ignore inquiries from the past 14 days, so the more bunched you can make those hard inquires the better.


The fifth category that determines your credit score is Credit Mix which makes up the last 10% of your score. The score is based on the types of credit you have. Do you just have credit cards, or do you also have mortgage loans, retail accounts, auto loans, and more.

Putting the Categories Together

The five categories for determining your credit score are Payment History, Amounts Owed, Length of Credit History, New Credit, and Credit Mix. The first two Payment History and Amounts Owed, combine for 65% of your credit score, so be sure to make your payments on time and try to keep your revolving utilization below 30%.

Additional Tips for a Better Credit Score

Here are some other tips. If you pay off a credit card, think twice before you close the account as that can negatively impact your credit score. Closing a line of credit can increase your revolving utilization and reduce your average length of credit both of which can do damage to your score.

If you are retired, be sure to check our credit score. If the house is paid off, the cards are paid off, and you don’t use credit score, you could end up in a situation in which you have bad or no credit. I’ve seen too many retirees get denied loans because they have no credit. They can have $5 million in their retirement accounts but can’t get a loan for a condo in Florida, all because they have no credit. Be sure to keep your lines of credit active in case you want to apply for a loan later on.

About Spencer Ford

Spencer Ford is chief executive officer & wealth advisor at Conservative Financial Solutions in Harrison, Ohio.

Passionate about helping others be their best, Spencer has built his career on helping clients build more stable retirements.  He holds a Bachelor of Arts in Biblical Studies and a Master of Arts in Counseling from Cincinnati Christian University. This passion for helping others led him to Conservative Financial Solutions.

Spencer holds an Executive Certificate in Financial Planning from the Ohio State University and has completed extensive training and met rigorous ethical experience requirements in order to obtain his CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation. He has also passed the series 7 and 65 securities exams and is a licensed insurance agent in Ohio, Indiana, and Kentucky. He is able to have the opportunity to advise clients on both investments and retirement income planning.  Spencer is delighted to work with clients and enjoys helping them plan the right track to pursue their ideal retirement lifestyles.

In his spare time, Spencer serves his community as a member of Greater Harrison Chamber of Commerce and Greater Harrison Rotary.  He also enjoys playing music on his church’s worship team.