Does Having Money in a Brokerage Account Help Your Credit Score?

Many people open a brokerage account to invest in their futures, and they may think that smart move boosts their credit scores. However, assets wont improve your credit numbers, say experts from FICO, the company that sets the credit scores most lenders evaluate. That doesnt mean a brokerage account is useless when you apply for a loan. But if you really want to shine come application time, burnish your credit credentials with a few other financial moves.

The Credit Score Scale

Your credit score helps determine your borrowing terms. A credit score of 750 or more gets you the lowest interest rates on loans and credit cards. With a score of 710 to 749, you qualify for good but not the best deals on interest charges. At 650 to 709, loan approval is a snap, though interest rates rise. Finding decent loan terms is tougher with a score of 580 to 649. If you score below 580, lenders will either deny you credit or charge you high, subprime rates.

Behind Your Score

FICO lists five areas that generate your number. Those factors measure how youve handled credit, rather than how many assets you claim. At 35 percent of your score, payment history is the biggest determinant. Late payments, delinquencies and collection actions all drag down payment history. The amount you owe to creditors makes up 30 percent of your credit score. The length of your credit history is behind 15 percent of your score. The longer youve had credit accounts, the better your score looks. New credit, which includes the number of just-opened accounts and recent credit inquiries, is 10 percent of your score. Banks look unfavorably on a rash of new credit lines. Finally, types of credit compose 10 percent of your score. Lenders prefer borrowers who can manage all kinds of debt, from installment loans on cars to revolving balances on credit cards.

What Doesn't Count

Just as brokerage account balances dont matter in your credit score, neither do your marital status, your age, your salary or your employment history. Interest rates charged on credit cards or paid through brokerage or banking accounts wont affect your credit score, either, according to FICO. And its a myth that all credit checks ding your score. Credit checks from you, your employer, lenders reviewing existing accounts and banks offering preapproved credit cards dont weigh on your credit score.

When Brokerage Accounts Matter

Your credit score is just one factor in a lenders decision to grant a loan. The U.S. Department of Housing and Urban Development advises prospective borrowers to submit printed details of assets when they apply for a mortgage. That includes current statements on accounts containing bonds and stocks, as well as copies of checking and savings account statements for the last six months. The documents help lenders determine whether a borrower could cover the mortgage if he loses his job or experiences other unexpected budget setbacks. FICO says lenders also want to know your salary, occupation and employment history.

Improve Your Credit Score

If your brokerage account wont boost your credit score, several other factors will. Make all payments on time. Set up payment reminders and switch to automatic withdrawals to cut back on late payments. Slash existing debt to avoid bumping against credit limits. Keep balances below 35 percent of limits. Avoid opening several new accounts at once. Obtain your free, annual credit report. Comb the report for mistakes and contact creditors to fix errors. FICO recommends that consumers steer clear of companies or agencies that promise quick credit-score fixes for a fee. Improving your score requires responsibly managing credit for a year or more.