The Five Factors That Make Up Your Credit Score

Your credit score is a three-digit number built from five specific pieces of information in your credit report. The score itself ranges from 300 to 850, and lenders use it to decide whether to lend you money and at what interest rate. The five factors are not weighted equally — some matter far more than others.

The largest factor is payment history, which accounts for 35 percent of your score. This is whether you paid your bills on time. A single late payment can lower your score, and the more recent the late payment, the bigger the damage. Payments that are 30, 60, 90, or 120 days late all show up separately, and the later you were, the worse it looks.

The second-largest factor is credit utilization, which accounts for 30 percent. This is how much of your available credit you are using right now. If you have a credit card with a $5,000 limit and a $2,000 balance, your utilization is 40 percent. Lower utilization is better — most scoring models reward you for using less than 30 percent of your available credit.

The remaining three factors are length of credit history (15 percent), credit mix (10 percent), and new credit inquiries (10 percent). Length of history rewards you for keeping accounts open over time. Credit mix means having different types of debt — a credit card, an auto loan, and a mortgage all together look better than three credit cards. New inquiries are the hard pulls that happen when you explore for credit; too many in a short time can lower your score slightly.

Key Takeaways

  • Payment history (35 percent) and credit utilization (30 percent) together make up nearly two-thirds of your score, so paying on time and keeping balances low has the biggest impact.
  • A late payment stays on your credit report for seven years, but its damage to your score fades over time if you pay on time afterward.
  • Credit utilization is calculated month to month based on your balance when the credit card company reports to the bureaus, so paying down a balance before the statement closes can improve your score quickly.
  • Opening many new accounts in a short time can lower your score temporarily, but the effect is smaller than late payments or high utilization.
  • Your credit score is recalculated regularly as new information arrives in your credit report, so changes to your habits show up within weeks or months.

How Payment History Affects Your Score

Payment history is the single largest factor because lenders care most about whether you paid them back before. Every account you have — credit cards, loans, utility bills, medical debt — can show up as on-time or late. One late payment can drop your score by 100 points or more, depending on how high your score was to begin with and how late the payment was.

The damage is not permanent. A late payment stays on your credit report for seven years from the date you missed the payment, but its effect on your score weakens over time. A late payment from two years ago hurts less than a late payment from two months ago. If you have a late payment in your history, the best thing you can do now is make every payment on time going forward — that pattern will gradually rebuild your score.

If you have missed a payment, contact the creditor or lender and pay it as soon as you can. Some creditors will remove a late payment from your report if you ask and have a good history otherwise, though they are not required to. Paying off a debt that is in collections also does not remove the collection from your report, but it does stop the damage from growing and shows future lenders that you resolved it.

Why Credit Utilization Matters More Than You Might Think

Credit utilization is how much of your credit limit you are using across all your accounts. If you have three credit cards with limits of $2,000, $3,000, and $5,000 (total $10,000), and you carry balances of $1,000, $1,500, and $2,000 (total $4,500), your utilization is 45 percent. Scoring models typically reward you for staying under 30 percent.

The reason utilization matters so much is that it signals risk. Someone using 90 percent of their available credit looks like they are in financial stress, even if they pay on time. Someone using 10 percent looks like they have room to handle an emergency. Lenders see high utilization as a warning sign.

The good news is that utilization changes month to month. Credit card companies report your balance to the credit bureaus on a specific day each month, usually your statement closing date. If you pay down your balance before that date, the lower number gets reported. You do not have to carry a balance to build credit — paying off your card in full each month and having a low reported balance is ideal. This is one of the fastest ways to improve your score if you have high utilization right now.

Length of Credit History and Why Older Accounts Help

Length of credit history accounts for 15 percent of your score and rewards you for keeping accounts open over time. The scoring model looks at the age of your oldest account, the age of your newest account, and the average age of all your accounts. A longer average age is better.

This is why closing old credit cards can hurt your score — you lose the age of that account, and you also lose the credit limit, which can raise your utilization on your remaining cards. If you have an old card you no longer use, it is usually better to keep it open and use it occasionally (then pay it off) than to close it.

If you are new to credit, you cannot do anything about this factor yet — you straightforward have to wait. Time is the only thing that builds length of history. After a few years of responsible use, this factor will help your score more and more.

Credit Mix: Why Having Different Types of Debt Helps

Credit mix means having different kinds of credit accounts. Credit cards are revolving credit (you can borrow, repay, and borrow again). Auto loans and mortgages are installment credit (you borrow a fixed amount and pay it back in fixed payments). Having both types shows lenders you can handle different kinds of debt.

Credit mix accounts for only 10 percent of your score, so it should not drive your decisions. You should never take out a loan you do not need just to improve your credit mix. But if you already have an auto loan and a credit card, that is better for your score than having two credit cards and no installment accounts.

If you have only credit cards right now, do not worry — building a good payment history and low utilization on those cards will get you to a solid score. When you naturally need to borrow for a car or home, the mix will improve.

New Credit Inquiries and Why Multiple Applications Hurt Slightly

When you explore for credit, the lender pulls your credit report. This is called a hard inquiry and it shows up on your credit report. Each hard inquiry can lower your score by a few points. Multiple inquiries in a short time can add up, but the effect is smaller than late payments or high utilization.

Hard inquiries stay on your report for two years, but they stop affecting your score after about 12 months. If you are shopping for a mortgage or auto loan, multiple inquiries within 14 to 45 days (depending on the scoring model) usually count as a single inquiry, because the model assumes you are rate-shopping, not opening multiple new accounts.

Soft inquiries — when you check your own credit or when a company checks your credit for a pre-approved offer — do not affect your score at all. Only hard inquiries from lenders count.

How to Check Your Own Credit Score and Report

You are may have access to to one free credit report per year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can request all three at once at AnnualCreditReport.com, which is the official site run by the three bureaus. This report shows you all the accounts, payments, and inquiries that make up your score — but it does not include your actual score number.

Your credit score itself is separate from your credit report. Many credit card companies and banks now show you your score for free if you are a customer. You can also buy your score from the three bureaus directly, or from services like Credit Karma or Credit Sesame, which offer free scores (though they may not be the exact same number that a lender sees, because different scoring models exist).

Check your credit report at least once a year for errors. If you see an account you do not recognize, a payment marked late that you made on time, or a hard inquiry you did not authorize, you can dispute it with the bureau. The bureau has 30 days to investigate and correct or remove the error.

Frequently Asked Questions

Does checking my own credit score lower it?

No. Checking your own credit score or report is a soft inquiry and does not affect your score. Only hard inquiries from lenders when you explore for credit count against you. You can check your score as often as you want without any penalty.

How long does it take to improve my credit score?

Changes show up within weeks or months, depending on what changed. If you pay down a credit card balance, that lower utilization can show up in your score within 30 to 45 days. If you make a late payment on time, that on-time payment starts helping your score when ready, but the late payment itself stays on your report for seven years. Rebuilding from a very low score takes longer than improving a score that is already decent.

Can I have a good credit score with just one credit card?

Yes. Payment history and utilization together make up 65 percent of your score. If you pay your credit card on time every month and keep your balance low, you can build a good score with just that one card. Credit mix and length of history help, but they are not required.

What is a good credit score?

Scores above 670 are generally considered good, and scores above 740 are considered very good. Lenders have different standards, so a score that gets you approved for one loan might not for another. The higher your score, the better interest rates you will see.

If I pay off a collection account, does it disappear from my credit report?

No. Paying off a collection account stops the damage from growing and shows future lenders you resolved it, but the collection stays on your report for seven years from the original delinquency date. However, a paid collection hurts your score less than an unpaid one, so paying it off is still worth doing.