Your credit score is determined by multiple factors, including when you pay your bills, how high your credit card balances are, and how long you’ve had your credit accounts open. Read on to find out which factors have the largest impact on your credit.
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What makes up your credit score?
Your credit score is made up of five key factors. Knowing what these factors are can help you create an effective plan to improve your credit score.
Factors that contribute to your credit score
- Payment history: This tracks whether you usually pay your bills on time or not.
- Credit utilization: Tracks how much of your available credit you’re using.
- Length of credit history: The average age of your credit accounts and the age of your oldest account.
- Credit mix: The variety of the types of credit you have.
- New credit: Whether you’ve recently applied for or opened any new credit accounts.
How much each factor impacts your credit score varies based on the scoring company and model.
Here’s a visual breakdown of the percentage of your credit score that’s affected by each factor in both popular models:
FICO credit scoring factors
VantageScore credit scoring factors
As you can see, VantageScore categorizes its factors slightly differently than FICO does—for instance, it lumps credit age and credit mix into a single factor, called Depth of Credit.
The differences between the models’ scoring factors are relatively superficial. Ultimately, both FICO and VantageScore evaluate essentially the same data to create your score, although they organize this data differently.
Which factors have the biggest impact on your credit score?
It’s worth noting that two of the five key scoring factors have much larger impacts on your credit score than the others.
Those two factors are payment history and credit utilization rate.
Your payment history has the biggest impact on both your FICO and VantageScore credit scores. It makes up 35% of your FICO score and 40% of your VantageScore.
Consistently paying your bills on time increases your credit score, while late payments damage it. Lenders usually report missed payments to the bureaus once they’re 30 days overdue, meaning you should always catch up on any overdue debts before you get a negative mark on your credit report.
If your payments become extremely overdue, you may also get more serious negative entries on your credit report, like a collection account (a debt that your lender has sold or transferred to a debt collection agency because you didn’t repay it).
Credit utilization rate
Both credit scoring models reward you for having a lower credit utilization rate, i.e., for using less credit. That’s because using a lot of credit suggests that you might be financially struggling, which means you could miss payments.
How credit utilization works
Let’s imagine you have a combined credit card limit of $10,000 across all of your credit cards, but you’ve only spent $800 this month. Your current utilization rate is 8% (which is well within the recommended limits).
To achieve the highest credit score possible, VantageScore says you should use less than 10% of your available credit. 1 However, other experts say it’s fine to use up to 30% of your available credit on your credit cards.
To stay on the safe side and maximize your credit-building efforts, use as little available credit as possible or pay your balance frequently throughout the billing cycle to keep that number low.
Other factors affecting your credit score
The remaining scoring factors individually have a relatively small impact on your credit score. However, you should still know what they are because they collectively account for over a third of your score.
These credit scoring factors are:
- Length of credit history: The scoring models award more points to consumers who have been using credit for longer. The models measure this by looking at the average age of all of your credit accounts, as well as your oldest account. You can often dramatically increase your credit age by becoming an authorized user on a family member or friend’s credit card, as you’ll benefit from their account history.
- Credit mix: The scoring models also look at the different type of credit accounts you have. The variety of accounts you have is called your credit mix. The more kinds of credit that you have, the better. As a general rule, aim to have at least one installment loan (like a mortgage, car loan, or student loan) and one revolving credit account (i.e., a credit card) to maintain a good credit mix.
- New credit: FICO and VantageScore also look at how recently you opened or applied for a new credit account. When you apply for credit, your potential lender will check your credit, which will cause a hard inquiry to appear on your credit report. Hard inquiries lower your credit score by several points, although the effect usually only lasts for a few months.
What doesn’t affect your credit score?
While you should pay attention to the factors mentioned above to ensure your credit score keeps rising, you may be unnecessarily worried about factors that don’t actually impact your score.
The following factors never impact your credit score:
- Your age, race, sexual orientation, or religion 2
- Your income, bank balance, and employment history
- Soft inquiries (i.e., credit checks that you didn’t authorize)
- Child support obligations
- Checking your own score
In addition, information that doesn’t appear on your credit report can’t affect your credit score. For example, since the credit bureaus removed all tax liens and court judgments from consumer reports, they can no longer lower your credit score. 3
How to improve your credit score
Understanding how the credit scoring models work is the first step to achieving a good credit score.
If you want to take things further and actively improve your credit, here are some tips to help you do that:
- Monitor your credit: Sign up for one of the credit bureaus’ credit monitoring services to keep tabs on your credit report and score. You’ll be able to see if any negative items are added to your credit report and take steps to offset them.
- Dispute errors: While monitoring your credit report, you may find inaccurate information that’s unfairly damaging your score. If you find an error, dispute the mistake immediately by sending a credit dispute letter to the bureau that’s reporting it.
- Pay your bills on time: As mentioned, missing payments is one of the fastest ways to hurt your credit score. On the flip side, making consistent on-time payments is a great way to improve your score over time. To ensure you never miss a payment, try to set your due dates on the same day and set up autopay either through your lenders or your bank.
- Lower your credit card balances: Given the impact that credit utilization has on your credit score, you want to keep this number low. Pay your credit card bill at the right time every month to maintain a good utilization rate.
- Don’t close old accounts: Closing a credit account lowers your total available credit, which, once again, impacts that ever-important credit utilization rate. If you have a card you’re considering closing, try keeping it active by assigning it a small recurring payment (like your Netflix subscription).