Credit scores are built from five measurable pieces of your borrowing history

Your credit score is a three-digit number that lenders use to decide whether to lend you money and at what interest rate. The score comes from data in your credit report — a record of every loan, credit card, and payment you have made. The three major credit bureaus (Equifax, Experian, and TransUnion) each collect this data and calculate their own version of your score using the same basic formula.

The formula has five parts: payment history, amounts owed, length of credit history, credit mix, and recent inquiries. Each part carries a different weight. If you pay your bills on time and keep your balances low, your score will be higher. If you miss payments or carry large balances, your score will drop. The score updates every month as new information reaches the bureaus.

Key Takeaways

  • Payment history makes up 35 percent of your score, so a single missed payment can lower it by dozens of points.
  • The amount you owe on credit cards matters more than the total amount of debt — carrying a $500 balance on a $1,000 limit hurts more than owing $5,000 on a $20,000 limit.
  • The longer your oldest account has been open, the higher your score, which is why closing old credit cards can lower your score even if you pay them off.
  • Having different types of credit (a car loan, a credit card, and a mortgage) boosts your score more than having only credit cards.
  • Hard inquiries from lenders you applied to lower your score slightly, but soft inquiries (like checking your own score) do not.

Payment history: 35 percent of your score

Payment history is the largest single factor in your credit score. It measures whether you paid each bill on time. A payment is considered late if it arrives 30 days or more after the due date. The bureaus record how many late payments you have, how recent they are, and how far behind you fell.

One missed payment can lower your score by 100 points or more, depending on how high your score was before. A payment that is 30 days late hurts less than one that is 90 days late. A late payment from two years ago hurts less than one from two months ago. Payments that are current or only a few days late do not appear on your report at all.

If you have never missed a payment, your payment history is perfect, and this part of your score will be as high as it can be. If you have missed payments, the damage fades over time — a late payment stops affecting your score after seven years, when it falls off your report entirely.

Amounts owed: 30 percent of your score

The second-largest factor is how much you owe compared to your credit limits. This is called your credit utilization ratio. If you have a credit card with a $1,000 limit and a $300 balance, your utilization on that card is 30 percent. If you have multiple cards, the bureaus calculate your total utilization across all of them.

A lower utilization ratio is better. Most scoring models reward you for keeping utilization below 30 percent. If you are using 50 percent or more of your available credit, your score will drop noticeably. Using 90 percent or more signals to lenders that you are financially stretched, and your score will fall further.

This factor measures only revolving credit — credit cards and lines of credit where you can borrow, repay, and borrow again. It does not measure installment loans like car loans or mortgages, where you borrow a fixed amount and pay it back in equal monthly payments. Paying off a credit card balance completely each month is the best way to keep utilization low and protect this part of your score.

Length of credit history: 15 percent of your score

The bureaus track how long you have had credit accounts open. This factor includes 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.

If you are new to credit, this part of your score will be lower straightforward because you have not had accounts open long enough. As your oldest account ages, this part of your score will climb. 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.

You do not need to use an old card to keep it open. Keeping it in a drawer with a small recurring charge (like a streaming service) is enough to maintain the account and preserve its age. The card issuer may close the account if it sits completely unused for a year or more, but as long as it remains open, it helps your score.

Credit mix: 10 percent of your score

Credit mix measures the variety of credit types you have. The bureaus look at whether you carry credit cards, car loans, mortgages, student loans, or other types of debt. Having different types of credit shows lenders you can manage different kinds of borrowing.

If you have only credit cards, this part of your score will be lower than if you also have a car loan or mortgage. However, credit mix is only 10 percent of your score, so it should not drive your borrowing decisions. Taking out a loan you do not need just to improve your credit mix will cost you money in interest and is not worth the small score boost.

If you already have a mortgage and a car loan, adding a credit card will improve your mix. If you have only credit cards, your score will still be respectable — the other four factors matter much more.

Recent inquiries: 10 percent of your score

When you explore for credit, the lender requests your credit report from one of the bureaus. This request is called a hard inquiry or hard pull. Each hard inquiry lowers your score by a few points. Multiple inquiries within a short time (usually 14 to 45 days, depending on the scoring model) count as a single inquiry, so shopping for a car loan or mortgage in a short window does not hurt as much as explore for credit over several months.

Hard inquiries stay on your report for two years but stop affecting your score after about three months. Checking your own credit score or having an employer check your credit is a soft inquiry and does not lower your score at all.

If you have not applied for new credit recently, this part of your score will be at its highest. If you have applied for several credit cards or loans in the past few months, this part of your score will be lower. The impact is small compared to payment history or amounts owed, but it is real.

How the three bureaus differ

Equifax, Experian, and TransUnion each maintain their own credit reports and calculate their own scores. They do not always have the same information about you. One bureau might have a late payment that another bureau does not know about yet. One bureau might list a closed account while another has already removed it.

Because of these differences, your score can vary between the three bureaus. A difference of 20 to 50 points is common. You can order a free credit report from each bureau once per year at annualcreditreport.com, which is the official government site. Your report shows what information each bureau has on file, which helps explain why your scores differ.

Most lenders use one of the three bureaus, but some use all three and average the scores. Mortgage lenders often use all three. Credit card companies might use just one. Knowing that your scores can vary helps you understand why one lender might offer you a better rate than another.

Frequently Asked Questions

Does paying off debt when ready raise my credit score?

Paying off a credit card balance lowers your utilization ratio, which can raise your score within a month or two. However, paying off an installment loan (like a car loan) does not raise your score the same way — it actually removes an active account from your credit mix. The score boost from lower utilization usually outweighs the loss, but the effect is smaller than you might expect.

How long does a late payment stay on my credit report?

A late payment stays on your report for seven years from the date it was first reported as late. It stops affecting your score after about three to four years, but lenders can still see it for the full seven years. After seven years, it falls off your report entirely and no longer affects your score.

Can I have a high credit score with no credit history?

No. Credit scores require credit history to calculate. If you have never borrowed money or opened a credit account, you have no score. Building credit takes time — you need at least six months of history before most bureaus will generate a score, and the score will be lower until you have several years of history.

Does closing a credit card hurt my score?

Yes, closing a credit card can lower your score in two ways: it removes the card's credit limit from your total available credit (raising your utilization ratio), and it removes the card's age from your average account age. The impact is larger if the card is old or if you have few other accounts. Keeping the card open is better for your score, even if you do not use it.

What is a good credit score?

Credit scores range from 300 to 850. Scores above 670 are generally considered good, and scores above 740 are considered very good. Lenders use different cutoffs, so a score of 650 might get you approved for a credit card but not a mortgage. The higher your score, the lower the interest rate lenders will offer you.