What Goes Into Your Credit Score
Your credit score is a three-digit number that lenders use to decide whether to lend you money and what interest rate to charge. The score comes from a mathematical formula that weighs five different categories of information from your credit report. The three major credit bureaus—Equifax, Experian, and TransUnion—each calculate your score slightly differently, so you may see different numbers from each one.
The formula does not look at your income, employment history, or savings. It only looks at how you have borrowed and repaid money in the past. A higher score means you have a track record of paying debts on time; a lower score means you have missed payments, carried high balances, or had other problems with credit.
Key Takeaways
- Payment history makes up 35 percent of your score and is the single largest factor—missed or late payments hurt more than anything else.
- Credit utilization (how much of your available credit you are using) accounts for 30 percent and is calculated across all your accounts combined.
- Length of credit history, mix of credit types, and new credit inquiries together make up the remaining 35 percent.
- You can see your credit report for free once per year from each bureau at annualcreditreport.com, though the score itself may cost a few dollars.
- Small improvements in any category take weeks or months to show up in your score because the bureaus update their records on different schedules.
Payment History: 35 Percent of Your Score
Payment history is the largest single piece of your credit score. It measures whether you have paid your bills on time. The bureaus track every payment you have made on credit cards, loans, and other accounts that report to them. A single late payment can lower your score by 50 to 100 points, depending on how late it was and what your score looked like before.
A payment is considered late if it is 30 days past the due date. The later it is, the more damage it does. A payment that is 90 days late hurts worse than one that is 30 days late. Accounts sent to a collection agency or charged off (written off as a loss by the lender) cause the most harm. These negative marks stay on your report for seven years from the date of the first missed payment, though their impact fades over time.
One missed payment does not permanently destroy your score. If you have a long history of on-time payments and then miss one, your score will drop but can recover within a few months of getting back on track. If you have a pattern of late payments, your score will be much lower and will take longer to rebuild.
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 $1,500 balance, your utilization on that card is 30 percent. The bureaus look at your utilization on each individual card and also your total utilization across all cards combined.
Lower utilization is better. Most scoring models reward you for using less than 10 percent of your available credit. Using more than 30 percent starts to lower your score. Maxing out a card (using 100 percent of the limit) causes significant damage. This is true even if you pay the full balance every month—what matters is the balance reported to the bureaus, which is usually the balance on your statement closing date, not your current balance.
Utilization can change quickly. If you pay down a balance, your score can improve within a month or two. If you run up a balance, your score can drop just as fast. Unlike payment history, utilization has no memory—once you pay it down, the damage stops accumulating, even if you had high utilization for years.
Length of Credit History: 15 Percent of Your Score
This category measures how long you have been using credit. It includes the age of your oldest account, the age of your newest account, and the average age of all your accounts. The longer your credit history, the better—a person with accounts that have been open for 10 years will score higher than someone with accounts open for only 2 years, all else equal.
This is why closing old accounts can hurt your score. When you close a credit card, it stops helping your average age calculation and may raise your overall utilization if you move the balance to another card. Keeping old accounts open, even if you do not use them, helps your score by keeping your average age high and your total available credit high.
Credit Mix: 10 Percent of Your Score
Credit mix means having different types of credit accounts. The bureaus look at whether you have credit cards, installment loans (like car loans or personal loans), mortgage loans, and other types of credit. Having a mix of different types shows lenders that you can manage different kinds of debt.
This category has less weight than the others, so you should not take out a loan just to improve your mix. If you already have several credit cards and a car loan, you have a healthy mix. If you only have credit cards and no installment loans, your score might be slightly lower, but the difference is usually small.
New Credit Inquiries: 10 Percent of Your Score
When you explore for credit, the lender asks the bureau for a copy of your report. This is called a hard inquiry or hard pull. Each hard inquiry can lower your score by a few points. Multiple inquiries in a short time (within 14 to 45 days, depending on the scoring model) usually 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 cards one at a time over several months.
Hard inquiries stay on your report for two years but stop affecting your score after about three to six months. Checking your own credit report or a lender pre-may have access to you without a hard pull does not lower your score. Only applications for new credit count.
What Does Not Affect Your Score
Your credit score ignores several things that you might think matter. It does not look at your income, job history, or savings account balance. It does not consider your age, race, or gender. It does not care whether you rent or own your home, though mortgage payment history does report to the bureaus and affects your score.
Utility bills, phone bills, and insurance payments do not appear on your credit report unless you fall far behind and the company sends the debt to a collection agency. Medical debt that has been paid off also does not appear on most credit reports as of 2023, though unpaid medical debt sent to collections still does. Checking your own credit report does not lower your score.
How to Check Your Own Credit Score and Report
You are may have access to to a free credit report from each of the three bureaus once per year. Go to annualcreditreport.com, which is the official site run by the bureaus themselves. You can order all three reports at once or spread them out over the year. The report shows all the accounts, payments, and inquiries that the bureau has on file for you.
The report itself is free, but the score is usually not included. Many credit card companies and banks now show your score for free in your online account. You can also buy your score directly from the bureaus or from sites like Credit Karma or Credit Sesame, which offer free scores (though they may use a different scoring model than the one lenders use). The most common model is FICO, which ranges from 300 to 850.
When you get your report, check it for errors. Look for accounts you do not recognize, payments marked late that you know you made on time, or duplicate entries. If you find an error, contact the bureau in writing and ask them to investigate. Errors are more common than most people think and can lower your score unfairly.
Frequently Asked Questions
How long does it take for changes to show up in my score?
The three bureaus update their records on different schedules, usually monthly. A payment you make today might not show up for 30 to 45 days. Once it does show up, your score can change within a few days. Paying down a credit card balance can improve your score faster than making a payment on an installment loan because utilization updates more quickly than payment history.
Does paying off old debt help my score?
Paying off recent debt helps more than paying off old debt. A paid-off account that is several years old still shows on your report and still helps your score by adding to your average account age. Paying off a debt from 10 years ago that is still on your report does not change your score much because the payment history is already old. Paying off recent debt or high balances helps more.
Can I improve my score if I have no credit history?
Yes. If you have never borrowed money, you have no credit history and no score. You can build one by opening a credit card (a secured card if you cannot get a regular one), using it for small purchases, and paying the full balance every month. After six months to a year of on-time payments, you will have a score. It will be low at first but will improve as your history grows.
What is a good credit score?
Scores range from 300 to 850. Most lenders consider 670 and above to be good. Scores of 740 and above usually may have access to for the best interest rates. Scores below 580 make it hard to borrow at all. Your score matters most when you are explore for a mortgage, car loan, or credit card. For other purposes, lenders may look at your full report instead of just the number.
Does my spouse's credit score affect mine?
No. Each person has their own credit report and score based on accounts in their name. If you have a joint account with your spouse, both of your names appear on it and it affects both scores. If you have separate accounts, they do not affect each other. Getting married does not merge your credit histories.