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What Affects Your Credit Score?

Credit scores affect almost every aspect of your personal finance life, but what affects them?

While some factors that impact your own credit score are obvious, like your monthly payment history, others might surprise you.

There’s no denying having bad credit can negatively influence your future interest rates.

You’ll never have to puzzle over your credit report again, wondering what could have changed your score or how to strategically work to repair it.

In the article below, we’ll walk you through the 5 factors that influence your credit score, as well as a few that don’t, providing you with tips to boost your score along the way.

5 Main Factors That Affect Your Credit Score

Here are the five main factors that affect your credit score:

  1. Payment History: 35% of your Credit Score
  2. Credit Utilization Ratio: 30 % of your Credit Score
  3. Length of Credit History: 15% of your Credit Score
  4. Credit Mix: 10% of your Credit Score
  5. New Inquiries: 10% of your Credit Score

We’ll break down exactly what each of these factors encompasses below.

1. Payment History: 35% of Credit Score

This one should come as no surprise. Your history of making on-time payments on debts is one of the most important factors affecting your credit score.

No matter what type of debt, whether installment loans and revolving credit, both are heavily impacted by timely payments.

In fact, it accounts for 35% of your overall score, on two different types of credit scoring models, the FICO credit and VantageScore credit reporting scales.

Every 30 days, creditors report to the major credit bureaus (Equifax, Experian, and Transunion), telling them whether you make your payment or not.

The bottom line, one late payment won’t make or break your credit score, but multiple missed payments can seriously hurt your score.

In fact, missed payments that lead to foreclosures, bankruptcy, repossessions, and tax liens can devastate your credit score and your creditworthiness.

The longer you wait to make a payment to the issuer, the harder it is to improve your score in the aftermath.

Payment history mostly pertains to debts from mortgages, car loans, personal loans, and credit cards.

However, after several missed payments on services like your phone, internet, and medical bills, those accounts can be turned over to a debt collection agency and placed on your credit report.

Pro Tip: Automate your payments wherever possible to ensure none of your payments slip through the cracks and prioritize catching up on late payments ASAP.

2. Credit Utilization Ratio: 30% of Credit Score

In basic terms, your credit utilization ratio is a calculation based on how much of your available credit you use. Second, only to payment history, it makes up 30% of your credit score.

This number is calculated by dividing the total amount of credit that has been extended to you by the amounts owed.

Both the FICO and VantageScore models place a heavy emphasis on your credit utilization.

So how much of your credit limit should you use each month?

Experts suggest keeping your credit utilization at 30% or less, at a maximum to maintain a good credit score. To see even better results, you can limit your credit use to closer to 10%.

Pro Tip: It’s all about risk. In addition to keeping your credit utilization low, to begin with, you can improve your credit score by paying down large credit card balances, which shows lenders that you aren’t a risky borrower.

3. Length of Credit History: 15% of Credit Score

Another factor lenders use to assess your risk is the age of your credit.

As you might suspect, the longer your borrowing history is, the better your chances of getting approved for loans or credit cards are.

Younger borrowers with limited credit histories can run into trouble here, which a secured credit card can help with.

While less significant than your payment history or credit utilization, your credit age still accounts for a substantial amount of your score, at 15%.

The length of your credit history is calculated using:

  1. The age of your oldest account
  2. The age of your new account
  3. The average age of all of your credit accounts

Pro Tip: Ask a trusted friend or family member to add you as an authorized user on an account with a long and successful payment history.

4. Credit Mix: 10% of Credit Score

Composing 10% of your FICO score is your credit mix, or the variety of types of credit accounts you have.

Credit accounts can basically be boiled down into two categories: installment debts and revolving debts.

Installment debts are those that have a fixed schedule for repayment, such as an auto loan, student loan, or a mortgage.

Revolving credit accounts are more flexible, allowing you to make additional charges to your account rather than just paying it down.

Examples of revolving credit include home equity lines of credit and credit cards, among others.

Your credit mix is based on both the types of credit accounts you have and the number of accounts.

Pro Tip: You don’t have to stress over taking out every type of loan under the sun, as credit mix only makes up 10% of your score, but taking out a variety of loan types (as long as you need them) can help your score.

5. New Inquiries: 10% of Credit Score

When you apply for a new line of credit, the prospective lender will run a credit check. These credit inquiries come in two forms: soft inquiries and hard inquiries.

Only hard inquiries appear on your credit report and have the ability to lower your credit score.

Hard inquiries constitute the final 10% of your credit score.

While a single hard credit pull might only drop your score by a point or two, applying for several lines of credit within a short period of time could have the potential to lower your score more drastically, suggesting to lenders that you may be living beyond your means.

Fortunately, the damage done by hard inquiries is only temporary, hence the title of “new inquiries.”

Hard credit checks only affect your credit score for a year, and they’re removed from your report altogether after two years.

Pro Tip: If you’re looking to comparison shop for a specific type of funding, like a mortgage, try submitting all your applications within 14 days to lessen the impact on your score.

Get a FREE Copy of Your Credit Report

Unexpected Factors that Affect Your Credit Score

The way you use credit has a major influence on your score, as you can see from the five components of your FICO score above.

But there are even more factors that can have an impact on your score.

While you’re probably aware that missing a student loan payment will lower your credit score, some of the factors below might surprise you.

Identity Theft

You may have a history of responsible credit use, but the identity thief that steals your financial information probably won’t be as trustworthy.

Fortunately, you can place a fraud alert on your credit report and work with specialists to repair your credit.

Learn More:

  • What is Identity Theft?
  • Best Identity Theft Protection

Faulty Reporting

Accidents happen.

Though you may have paid your credit card balance on time last month, your bank could have entered the data wrong, resulting in an inaccurate report to the credit bureaus.

Monitoring your credit with a free online service can help you to quickly catch these errors.

As a general disclaimer, you’re entitled by the United States government to an annual free credit report that can be found at

Learn More:

  • Best Credit Monitoring Services

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Missed payments on credit accounts aren’t the only ones that count. If you leave a bill unpaid, it could eventually make its way to the collections stage.

Collection agencies can be downright frustrating in their debt collection attempts, and they stay on your credit report for seven years unless you act to get the collections account removed.

Some of the unpaid debts that can result in a collections account entry on your credit report include:

  • Traffic tickets
  • Medical bills
  • Utility bills
  • Phone/internet bills
  • Rent
  • Gym membership
  • Child support

Likewise, if you fail to pay your taxes after an extended amount of time, a tax lien could be filed against you, which can have legal ramifications and tank your credit score.

Paying Off a Loan

Shouldn’t paying off a loan help your credit score, not hurt it?

It depends on your credit portfolio. Since credit mix accounts for 10% of your credit score, closing out an account could alter your credit mix.

While paying off your student loans might give you a sense of accomplishment and put you on the path to financial freedom, it can also lower your score slightly if it’s the only installment debt you had.

Closing a Credit Account

Much like paying off a loan, canceling a credit card account can result in a drop in your credit score.

In addition to hurting your credit mix, this action also affects your credit limit.

When your credit limit goes down, it changes your credit utilization ratio, which can have a more significant effect on your score.

In most cases, it’s wiser to keep a credit card account open, but if you do have to close it, make sure that your balance is $0.

Changing Your Credit Limit

Increasing your credit limit can both help and hurt your credit score.

When you request a change to your credit limit, the lender will do a hard pull to reassess your creditability.

That action will result in a hard inquiry. The good news is, increasing your credit limit can help to improve your credit utilization in the long term.


Loan and credit card applications affect your credit score, but so can applications for other products and services.

Depending on the provider, you could be subject to a hard credit inquiry when you apply for some of the following:

  • Phone Plan: It’s become common for popular service providers to run hard credit checks before leasing you a smartphone and selling you a data plan.
  • Bank Account: When you open a checking account, the bank or credit union may require a hard inquiry to gauge your likelihood of over-drafting your account and letting fees accumulate. Some CDs and other savings accounts require a hard pull as well.
  • Insurance Policy: While most insurance applications result in only a soft inquiry, some insurers may run a hard credit inquiry to assess your risk.

How to Improve Your Credit Score

Now that you know what affects your credit score and the level of impact they have, you can start working to improve it.

The 10 strategies below provide you with a great starting point for boosting your score and keeping it high:

  1. Monitor your credit: With a free online credit monitoring service like Credit Karma, you can stay up to date on your score, inquiries, and changes to your report. You’ll also get tailored advice for boosting your score and credit offers with high approval odds based on your score.
  2. Look out for inaccuracies: If a mistake is responsible for a drop in your credit score, it’s important to act quickly to dispute it so you can get the damaging entry removed from your report.
  3. Stay on top of payments: Set reminders, automate if you can, and make sure to factor payments into your budget each month to ensure they get paid fully and on time.
  4. Make up late payments: Late payments can kill your credit score and can stay on your credit report for several years. The later your payments are, the more harmful they can be.
  5. Pay off debt: If your credit utilization ratio is high, then one of the best (and fastest) ways you can improve your score is by paying down debts.
  6. Apply strategically for new credit: Don’t apply for too many lines of credit as hard inquiries will stay on your report for 2 years. If you shop for quotes from auto or mortgage providers, try to complete your applications in a couple of weeks’ time.
  7. Apply for a secured credit card: If you have a short-lived credit history with few accounts to stand on, or your credit is low, you may be approved for a secured card. They come with minimal fees and use your deposit as collateral.
  8. Become an authorized user: Once again, being added to the account of a dependable friend with a proven track record of timely payments can give your score the boost it needs. Just make sure that their lender reports authorized users to the credit bureaus to ensure this strategy has the intended effect.
  9. Report rent and utility payments: Paid services like Rent Reporters reward you by reporting your timely rent payments to the credit bureaus, like a mortgage. With Experian Boost, your utility and phone bills can work towards improving your credit score, too.
  10. Hire a credit repair company: Sometimes repairing your credit can be an overwhelming task. If you’re fighting collection agencies, bankruptcy, or liens, a trained team of experts might be just what you need to dispute claims, negotiate payments, and improve your score.

With the knowledge above in hand, you can confidently move forward and take your credit score to the next level.