Smart Borrower Blog

Credit Cards Matter More Than You Think

Dec 19th, 2012 @ 11:18 PM by Amber Nelson

When it comes to your credit score, falling behind on your credit card payments may hurt you more than missing a mortgage payment, according to a new study from the Consumer Financial Protection Bureau.

In its first report about the workings of the three major credit bureaus and the accuracy of credit reporting, the CFPB found that credit card information has a bigger influence on scores than previously thought. And it’s little wonder: the study found that a majority (58percent) of data in any given credit report comes from credit card issuers. Only 13 percent comes from debt-collection agencies, seven percent each from student debt lenders and mortgage lenders, with the rest being reported by auto lenders.

The study also found that while one late mortgage payment can bring down a credit score more than a single late credit card payment, if there are several late credit card accounts, they are weighted more heavily than the mortgage delinquency.

“Regardless of the type of account, multiple delinquencies are always more severe than a single delinquency,” said Jeff Richardson, vice president of public relations for VantageScore Solutions, the company that creates the credit-scoring formulas in a BusinessWeek article. “… The impact from becoming delinquent on three bank card accounts would be similar to going delinquent on a mortgage, auto, and credit-card account simultaneously.”

That’s an interesting finding given that Americans have often been choosing to paying down credit cards over mortgage bills in the past few years. According to CFPB Director Richard Corday, that may be what they should have been doing to save their scores. He told reporters in a conference call that this new information should make people more careful with their credit card accounts.

“Especially around this holiday season,” he said, “consumers may take out a retail credit card in order to save 20 percent off their purchases on a given day. If they are not responsible with that one card, it could end up costing them a lot more down the line when they go to take out a mortgage and that credit card is a black mark on their credit report.”

The study also tried to determine the accuracy of credit -reporting.

“The extent to which credit reports contain material inaccuracies is uncertain,” said the CFPB in its report. “There have been conflicting reports on this issue.”

The CFPB paper pointed to a decade-long Federal Trade Commission study due out at the end of the year to shed more light on the subject.


About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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