My FICO Score
Credit Score Pareto Chart
Again, this is the Pareto Chart for your credit score. Companies use Pareto Charts when analyzing processes that need improvement. They help determine the defects behind the processes and the changes that will make the biggest impacts the fastest without having to fix everything at once. If you address the factors that cause the most problems, you will see drastic improvement quickly. The highest factor is on the left and the lowest factor on the right. The line shows the cumulative effect as you go across the chart. For your credit score, the most impactful factors are 'Payment History' and 'Utilization Rate', which make up 65% of the score. Therefore addressing these factors first will give you the biggest bang for your buck.
I dive into a Pareto Chart example, in the first post of this series. Essentially, if you address the issues that make up the majority weight of the problem or thing you are trying to improve you will see the greatest improvement early on.
I am calling you to use the Pareto Chart I have created for your credit score and then analyze what you can do to tackle the biggest factors affecting your score so you can get to the 800s.
Credit Card Factors in Order of Significance:
We’ll continue on with Payment History (The largest weight of your credit score)
Payment History is the record of your payments throughout the life of your credit score. This category is a little bit more difficult to address because it’s like the school attendance record of you credit cards payments and roll call has been going on for years and is already documented, sent to the office, and on your school record.
If you use any popular credit service such as Credit Karma, after clicking your score, and then clicking Payment History, you’ll find your percent of On-time Payments. Notice that this credit score factor runs a tight ship because to be rated ‘Excellent’ or ‘Good’ you need at least 99%.
I am lucky to have 100% in this category and I say lucky because most of us get our first credit cards at the young adult age of 18. When I got my first credit card at my bank, I honestly didn’t even know what I was signing up for. I went in to make changes to my checking account and came out with the changes and a new credit card. Putting something that has a grade factor that only allows for 2% error in the hands of a teen is one of life’s many injustices. It is like expecting a new student to average a 98/100 minimum on every test over their whole schooling career. Once my credit card came in the mail, I told my parents and got scolded on how having a credit card would ruin my life. I thought, “this can’t be true” and here I am about a decade later (lots of reading involved) with 100% on-time payments, 800+ score, and one who uses credit cards for free rewards and travel. I am lucky that my parents scared me into learning because not all get the warning. Credit cards do cause setbacks to many lives but they do not have to.
If you weren’t this lucky here’s some things you can do about it:
Go back into Credit Karma, click on ‘View full credit report’, click on any credit card and then see ‘Times 30/60/90 Days Late’. On the app, it looks like this:
There is one saving grace here, you can be late on a payment as long as you are not 30 days late. Also I have forgotten to pay a card for an entire cycle before and still have 100% on-time because many cards first slap you with a high late payment fee before turning you over to the office with a tardy mark. For everyone at or under 99%...
A Credit Karma article suggests that if a missed payment is 7 years old or if you actually paid on time, the credit company will remove the late payment from your credit report. I have less experience with this but I have had success in removing a late fee by calling the credit card company. I simply called and told them that I tried to pay the fee online and it didn’t go through or I tried to pay by phone and it was not processed or “I have been a faithful holder of your credit card for 5 years and have never missed a payment. I have already submitted the payment and you can see that on your end, and though it was 3 days late I did not receive proper notification. I have updated my contact info and it will not happen again. I would appreciate you valuing my loyalty as a card holder and removing this late fee.”
If all else fails, there is still one good thing and that is: you still have the present and future to get that percentage up. This is obviously a very long game but I have several credit cards and all of them report payments each month so each on-time report is one payment closer to 99%. And in seven years (which will come) you can go back and ask for the missed or late payment to be removed again.
We’ll continue with the remaining credit card factors next time… Many blessings, much favor, and wisdom to you!