Credit Score Factors
Understand exactly what impacts your credit score and learn actionable strategies to improve each factor.
Understanding Credit Score Factors
Your credit score isn't a mystery—it's calculated using a specific formula based on information in your credit report. The FICO score, used by 90% of lenders, weighs five key factors. Understanding these factors helps you take targeted action to improve your score.
The good news is that the two biggest factors—payment history and utilization—are largely within your control. By focusing your efforts on these areas, you can make the most significant improvements to your score.
Payment History (35%)
Payment history is the single most important factor in your credit score. Lenders want to know: do you pay your bills on time? This factor reflects your track record of making payments when due.
What's Included
- On-time payments for all credit accounts
- Late payments (30, 60, 90, 120+ days)
- Accounts sent to collections
- Bankruptcies, foreclosures, and other public records
- Severity, recency, and frequency of missed payments
How to Improve Payment History
Set up automatic payments
Autopay at least the minimum on every account ensures you never miss a payment due to forgetfulness.
Set calendar reminders
Create reminders a few days before due dates so you can verify payments will go through.
Contact creditors if you'll be late
Many creditors offer grace periods or hardship programs. Call before the 30-day mark when it gets reported.
Dispute any incorrect late payments
If you paid on time but it's reported as late, dispute with both the creditor and credit bureaus.
Ask for goodwill adjustments
If you have a good history with one late payment, ask the creditor to remove it as a goodwill gesture.
Key insight: A single late payment can drop your score 50-100+ points, and its impact lasts for years. Recent late payments hurt more than older ones. Preventing late payments is more effective than fixing them later.
Credit Utilization (30%)
Credit utilization measures how much of your available credit you're using. It's calculated by dividing your total credit card balances by your total credit limits. Lower utilization is better for your score.
Types of Utilization
- Overall utilization: Total balances divided by total limits across all cards
- Per-card utilization: Balance divided by limit on each individual card
- Both matter: Keep overall and individual card utilization low
How to Improve Utilization
Pay down credit card balances
The most direct way to lower utilization. Focus on cards with the highest utilization first.
Pay before statement closing date
Credit bureaus typically see your statement balance. Pay before the statement date for lower reported utilization.
Request credit limit increases
Higher limits lower your utilization ratio without changing your spending. Many issuers allow online requests.
Keep zero-balance cards open
Open accounts with zero balances contribute available credit, lowering your overall utilization.
Spread balances across cards
Rather than maxing one card, distribute spending to keep per-card utilization lower.
Pro tip: Utilization has no memory. Unlike late payments that hurt you for years, high utilization only affects your score for as long as it's high. Pay down balances and your score can improve quickly—often within 30 days.
Length of Credit History (15%)
This factor measures how long you've been using credit. A longer history gives lenders more data to assess your creditworthiness. This is why building credit early matters.
What's Measured
- Age of oldest account: When your first credit account was opened
- Age of newest account: When your most recent account was opened
- Average age of all accounts: Sum of all account ages divided by number of accounts
- Age of specific account types: How long you've had credit cards, loans, etc.
How to Improve Length of History
Keep old accounts open
Even if you don't use them regularly. Your oldest accounts are most valuable.
Use old cards occasionally
Make a small purchase every few months to prevent the issuer from closing inactive accounts.
Think carefully before closing accounts
Closing old accounts can shorten your average account age and reduce available credit.
Become an authorized user
Being added to an older account (with permission) can add that account's age to your credit history.
Be patient
This factor naturally improves over time. Focus on other factors you can improve more quickly.
Credit Mix (10%)
Credit mix refers to the variety of credit types in your portfolio. Lenders like to see that you can responsibly manage different kinds of credit accounts.
Types of Credit
Revolving Credit
- • Credit cards
- • Retail store cards
- • Home equity lines of credit (HELOC)
- • Flexible borrowing up to a limit
Installment Credit
- • Mortgages
- • Auto loans
- • Student loans
- • Personal loans
- • Fixed payments over set term
How to Improve Credit Mix
Don't open accounts just for mix
At only 10%, this factor isn't worth taking on debt or accounts you don't need.
Consider a credit-builder loan
If you only have credit cards, a small credit-builder loan can add installment history affordably.
Let mix develop naturally
As you finance cars, homes, or education over your lifetime, your mix will diversify naturally.
Important: Never take on debt you can't afford just to improve your credit mix. The interest costs will far outweigh any score benefit. This factor matters least of all five.
New Credit (10%)
This factor considers how much new credit you've recently applied for and opened. Multiple applications in a short time can signal financial stress and temporarily lower your score.
What's Measured
- Hard inquiries: When lenders check your credit for applications (stays on report 2 years, impacts score for 12 months)
- New accounts opened: Recently opened accounts are monitored
- Time since last account: How long since you opened your newest account
- Time since inquiries: How long since your credit was checked
Understanding Inquiries
Hard Inquiries (Affect Score)
- • Credit card applications
- • Loan applications
- • Mortgage applications
- • Apartment rental applications
- • Some utility applications
Soft Inquiries (No Impact)
- • Checking your own credit
- • Pre-approval offers
- • Employer background checks
- • Account reviews by existing creditors
- • Insurance quotes
How to Manage New Credit
Space out credit applications
Wait at least 6 months between applications when possible.
Rate shop within a short window
For mortgages, auto loans, and student loans, multiple inquiries within 14-45 days count as one for scoring purposes.
Only apply for credit you need
Avoid applying for store cards just for discounts or cards you'll never use.
Check for pre-qualification first
Many issuers offer soft-pull pre-qualification to see if you'll likely be approved before hard inquiry.
Common Mistakes That Hurt Your Score
Avoid these frequent errors that damage credit scores:
Paying late, even by a day
While most creditors report after 30 days, late fees and interest start immediately. Always pay on or before the due date.
Maxing out credit cards
High utilization is one of the fastest ways to tank your score. Keep balances well below limits.
Closing old credit cards
This hurts both length of history and utilization. Keep old accounts open even if rarely used.
Applying for multiple credit cards at once
Multiple hard inquiries lower your score and can signal desperation to lenders.
Ignoring your credit report
Errors and fraud can damage your score without your knowledge. Monitor regularly.
Co-signing without understanding the risk
You're fully responsible for co-signed debt. Late payments affect your credit too.
Paying only minimums long-term
This keeps balances and utilization high, hurting your score (and costing a fortune in interest).
Credit Score Improvement Checklist
Take these actions to improve your credit score across all five factors:
Set up autopay for all accounts
Ensure at least minimum payments are made automatically on every credit account.
Keep credit card balances under 30% of limits
Under 10% is even better. Pay before statement closing for best results.
Request credit limit increases
Higher limits lower utilization ratio without changing spending.
Keep old accounts open and active
Use older cards occasionally to prevent closure and maintain history.
Check credit reports from all three bureaus
Use AnnualCreditReport.com to monitor for errors and fraud.
Dispute any errors you find
Incorrect information could be hurting your score unnecessarily.
Space out new credit applications
Wait at least 6 months between applications when possible.
Be patient with time-based factors
Length of history and age of accounts improve naturally over time.
Credit Score Myths vs. Facts
Don't let misconceptions guide your credit decisions:
MYTH: Checking your own credit hurts your score
FACT: Checking your own credit is a soft inquiry and has zero impact on your score. Check as often as you like.
MYTH: You need to carry a balance to build credit
FACT: Paying your full balance every month builds credit just as effectively—and saves you money on interest. You don't need to pay to build credit.
MYTH: Closing credit cards is good for your score
FACT: Closing cards typically hurts your score by reducing available credit (higher utilization) and potentially shortening credit history.
MYTH: Income affects your credit score
FACT: Income is not a factor in credit score calculations. High earners can have bad credit, and modest earners can have excellent credit.
MYTH: All debt is bad for your credit
FACT: Responsibly managed debt (low balances, on-time payments) actually builds your credit. Having no credit history can be as problematic as bad credit.
MYTH: You only have one credit score
FACT: You have dozens of scores. FICO alone has multiple versions, plus there's VantageScore and industry-specific scores. They can vary significantly.
When to Get Professional Help
While many score improvements can be achieved independently, professional guidance can accelerate your progress:
Consider getting help if:
- • Your score isn't improving despite following best practices
- • You have errors on your report that aren't being corrected
- • You're preparing for a major purchase (home, car) and need to maximize your score
- • You have complex credit issues (multiple collections, mixed files, identity theft)
- • You're unsure which factors to prioritize for your specific situation
- • You want a personalized strategy to reach specific score goals
A credit professional can analyze your specific credit profile, identify the highest-impact improvements, and help you create a timeline for reaching your goals.
Ready to Optimize Your Credit Score?
Our credit experts can review your credit profile, identify the factors holding your score back, and create a personalized action plan for improvement.
Schedule Your Free ConsultationEducational Disclaimer
This content is for educational purposes only and does not constitute legal or financial advice. Results may vary based on individual circumstances. Always consult with qualified professionals for your specific situation.