Top 5 Things That Affect Your Credit Score

Table of contents

How is your credit score calculated? Read below for the full breakdown.

Credit can get pretty complicated because there are several different models and versions of your credit score. To keep things simple, we’ve broken down the main factors that impact your FICO score, which is the most widely used credit scoring model.

Your FICO Score is calculated by 5 different categories: Payment History, Amounts Owed, Length Of Credit History, New Credit, and Types Of Credit.

Key takeaways

  • Payment history (35%): Missed payments can seriously damage your score. Prevention is the best remedy.
  • Amounts owed (30%): Using too much of your credit balance can make you look like a high-risk borrower. Keep your debt low.
  • Length of credit history (15%): Good credit behaviors can help you establish a high score in just a few months. Closing unused credit accounts can hurt your score.
  • New credit (10%): Opening several new credit accounts can hurt your score. Try not to open multiple accounts over a short period of time.
  • Types of credit in use (10%): The FICO model looks at your mix of credit cards, loans, retail accounts, and more.


1. Payment history (35%)

Your payment history accounts for 35% of your credit score. This means that missed payments can do serious damage to your credit. Just one late payment could knock up to 110 points off your FICO score. Depending on the lender and your payment history, a late payment of just a day or two could be reported.

At the time, the late payment may cost you only a late fee. But it could cost you thousands later if a lower score means you pay a higher interest rate on your next loan.

Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy.


2. Amounts owed on your credit accounts (30%)

Having credit card debt doesn’t necessarily hurt your score. However, if you use too much of your total available credit balance, this can make you look like a high-risk borrower. Opinions vary, but experts say it’s best to use only 10% to 30% of your available credit to keep up your credit score.

It’s important to understand your credit utilization (the amount of debt relative to your total available credit). Closing out old credit accounts can lower your total available balance, which raises your credit utilization and hurts your score. For a healthy credit score, you generally want to keep your debt low, and your total available credit high.


3. Length of credit history (15%)

It takes some time to establish your credit history. But someone with a short credit history can get a high score, as long as they don’t have negative information on their report. In some cases, if a person has little to no debt or late payments, they can build up a high FICO score in just a few months. Good credit behaviors, like avoiding negative credit information and using credit cards wisely, can help someone build their score relatively quickly.

Keep in mind, this factor is one of the reasons why closing unused credit card accounts can hurt your score. Older credit accounts give you longer credit history, and closing them out might wipe the slate clean on that credit history.


4. New credit (10%)

If you open several new credit accounts, this rapid activity may appear like a high risk to borrowers and therefore hurt your score. If possible, try not to open multiple accounts over a short period of time.

If you’re in the process of applying for a loan, opening credit accounts can hurt your chances of getting approved. New credit accounts often involve hard inquiries that could knock points off your score.


5. Types of credit in use (10%)

The FICO scoring model will look at your mix of different credit cards, loans, retail accounts, and more. It’s not necessary to have a large variety of credit accounts to build your score. However, you should keep this factor in mind before signing up for any new credit account.


The bottom line

Even minor adjustments can impact your score, and it’s not always obvious whether they will hurt or help. If you’re trying to get approved for a loan, speak to a professional before you do anything that might affect your score. Changes like closing an old credit account, signing up for a new retail card, or even paying off collections might hurt your chances of getting approved.


Contact us today

Overall, when repairing or maintaining your credit, you never want to do anything that can be seen as impulsive. If you’re not sure what moves you should make, consider reaching out to our reputable credit counselor for help.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

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