The Five Things That Make Up Your Credit Score

Your credit score is a three-digit number built from five categories of information in your credit report. The three major credit bureaus — Equifax, Experian, and TransUnion — each calculate a score based on what lenders have reported about your accounts. The score ranges from 300 to 850, and lenders use it to decide whether to lend you money and at what interest rate.

The five categories are not weighted equally. Payment history makes up 35 percent of your score. The amount you owe across all accounts makes up 30 percent. The length of your credit history makes up 15 percent. New credit inquiries and accounts make up 10 percent. The mix of different types of credit you have makes up the remaining 10 percent.

Each bureau may calculate your score slightly differently because they do not always receive the same information from lenders. This is why you can have three different scores — one from each bureau — even though they are all based on the same five factors.

Key Takeaways

  • Payment history — whether you pay bills on time — is the single largest factor in your score at 35 percent.
  • Credit utilization, the percentage of your available credit that you are currently using, accounts for 30 percent and is the second-largest factor.
  • The age of your oldest account and the average age of all your accounts together make up 15 percent of your score.
  • Hard inquiries from lenders and newly opened accounts each have a small effect, but multiple inquiries in a short time can lower your score temporarily.
  • Having different types of credit — credit cards, car loans, mortgages — helps your score slightly, but only if you manage them responsibly.

Payment History: 35 Percent of Your Score

Payment history is the largest single factor because it shows lenders whether you have paid past debts on time. This includes credit cards, car loans, mortgages, student loans, and any other account that reports to the credit bureaus. A single late payment can lower your score, and the later the payment, the bigger the damage.

A payment 30 days late hurts less than one 90 days late. A payment that goes to collections or results in a charge-off — when a lender gives up trying to collect — causes serious damage that can take years to recover from. Bankruptcy also appears in this category and has a major negative effect.

On the positive side, making on-time payments month after month gradually rebuilds a damaged score. The older a late payment is, the less it matters. A late payment from seven years ago affects your score far less than one from last month.

Credit Utilization: 30 Percent of Your Score

Credit utilization is the percentage of your available credit that you are currently using. If you have a credit card with a $5,000 limit and a $2,000 balance, your utilization on that card is 40 percent. The bureaus look at utilization on individual cards and also your total utilization across all cards.

Lower utilization is better. Most scoring models reward utilization below 30 percent. Using 50 percent or more of your available credit signals to lenders that you may be financially stretched, and it lowers your score. Maxing out a card — using 100 percent of the limit — causes significant damage.

Utilization can change month to month as you pay down balances or charge new purchases. Unlike payment history, which builds over time, utilization affects your score when ready. Paying down a high balance can raise your score within weeks because the bureaus update utilization data frequently.

Length of Credit History: 15 Percent of Your Score

This factor measures how long you have had credit accounts open. The bureaus look at the age of your oldest account, the age of your newest account, and the average age of all your accounts. A longer history is better because it shows lenders you have managed credit over time.

This is why closing old credit cards can hurt your score — it removes an old account from the calculation and lowers your average account age. Keeping old accounts open, even if you do not use them, helps this part of your score. The exception is if an old account has an annual fee you cannot afford.

If you are new to credit, this factor works against you straightforward because you have not had accounts long enough. There is no way to speed this up — you build length of history only by time and by keeping accounts open.

New Credit Inquiries and Accounts: 10 Percent of Your Score

When you explore for credit, the lender pulls your credit report. This is called a hard inquiry and it appears on your report and lowers your score slightly — usually by a few points. The effect is temporary and fades over time, especially if you do not explore for more credit.

Multiple hard inquiries in a short period can add up and cause more damage. However, the bureaus understand that shopping for a mortgage or car loan means multiple inquiries, so they often count inquiries for the same type of loan within 14 to 45 days as a single inquiry.

Opening new accounts also affects this factor. A new account lowers your average account age and shows up as a recent inquiry, both of which lower your score temporarily. The damage is usually small and fades as the account ages.

Credit Mix: 10 Percent of Your Score

Credit mix refers to the different types of credit accounts you have. Revolving credit — credit cards and lines of credit where you can borrow, repay, and borrow again — is one type. Installment credit — car loans, mortgages, and personal loans where you borrow a set amount and pay it back in fixed payments — is another type.

Having both types of credit helps your score slightly because it shows lenders you can manage different kinds of debt. However, this factor is only 10 percent of your score, so it matters far less than payment history or utilization. You should not open accounts you do not need just to improve your mix.

If you have only credit cards and no installment loans, your score will not suffer badly. The bigger factors — paying on time and keeping utilization low — matter much more than having a perfect mix.

What Does Not Affect Your Score

Your income, employment history, and savings account balance do not appear in your credit score. Lenders may ask about these things when you explore for a loan, but they do not factor into the three-digit number itself.

Checking your own credit report does not lower your score. This is called a soft inquiry and it does not appear to other lenders. You can check your own report as often as you want without penalty.

Your race, gender, marital status, and other personal characteristics are not used in the score calculation. Rent payments, utility bills, and insurance payments typically do not report to the credit bureaus, so they do not affect your score — though some newer scoring models are beginning to include rent and utility data.

Frequently Asked Questions

How often does my credit score change?

Your score can change whenever the bureaus receive new information from lenders. This usually happens monthly when creditors report your account activity. A single payment or balance change can shift your score, though the change may be small. Major events like a late payment or a new account can cause larger swings.

Why do I have three different credit scores?

Equifax, Experian, and TransUnion each maintain separate credit reports and calculate separate scores. Lenders do not always report to all three bureaus, so each bureau may have different information about your accounts. Additionally, the bureaus may use different scoring models, which can produce different numbers even with identical data.

Can I improve my credit score quickly?

Paying down credit card balances can raise your score within weeks because utilization changes are reported quickly. However, building a strong score overall takes time. Payment history is the largest factor, and it improves only as you continue making on-time payments month after month. Late payments and negative marks take years to fade.

Does paying off a loan early help my credit score?

Paying off a loan early does not hurt your score, but it does not help it as much as you might expect. The account will show as paid in full, which is positive. However, closing the account removes it from your active credit mix and can lower your average account age slightly. The overall effect is usually neutral or slightly positive.

What credit score do I need to get a loan?

Different lenders have different minimum scores. Most mortgage lenders want a score of 620 or higher, though better rates usually require 740 or above. Credit card companies may approve scores as low as 580, while auto lenders often work with scores in the 600 range. The higher your score, the better the interest rate you will receive.