The five factors that make up your credit score

Your credit score is built from five measurable pieces of your financial history. Each one carries a different weight. The largest factor is payment history — whether you paid bills on time, and how far behind you fell if you didn't. The second-largest is credit utilization, which means how much of your available credit you are actually using right now. Third is length of credit history, measured from when you opened your oldest account. Fourth is credit mix, meaning whether you have different types of credit (credit cards, car loans, mortgages, student loans). Fifth is new credit inquiries, which tracks how many times you have recently asked for new credit.

These five categories are the framework used by FICO, the most widely used credit scoring model. Other scoring models exist — VantageScore is another common one — but they follow roughly the same structure. The exact percentages vary slightly between models, but payment history and credit utilization together account for about two-thirds of your score.

Key Takeaways

  • Payment history makes up roughly 35 percent of your score and is the single largest factor — a late payment or collection account will damage your score more than anything else.
  • Credit utilization (how much of your credit limit you are using) accounts for about 30 percent and can change your score month to month as your balances change.
  • Length of credit history, credit mix, and new inquiries together make up the remaining 35 percent and change more slowly.
  • A missed payment stays on your report for seven years, but its impact on your score weakens over time if you pay on time afterward.

Payment history: the largest piece of your score

Payment history measures whether you paid each bill by its due date. It includes credit cards, car loans, mortgages, student loans, medical debt sent to collections, and utility bills if they were reported to a credit bureau. One late payment can lower your score by 50 to 100 points depending on how late it was and how good your score was before. A payment 30 days late hurts less than one 90 days late. A payment sent to a collection agency hurts the most.

The damage is not permanent. A late payment from five years ago affects your score far less than one from last month. If you have paid on time consistently since the late payment, your score will gradually recover. However, the late payment itself remains on your credit report for seven years from the date you missed the payment.

Credit utilization: how much of your limit you are using

Credit utilization is the percentage of your total credit limit that you are currently carrying as a balance. If you have three credit cards with limits of $1,000, $2,000, and $3,000 (total $6,000), and you are carrying balances of $500, $800, and $1,200 (total $2,500), your utilization is about 42 percent. Most scoring models prefer to see utilization below 30 percent.

This factor changes every month as your balances change, so it can move your score up or down relatively quickly. Paying down a balance can raise your score within a month or two. Charging up a card can lower it just as fast. Utilization only counts for credit accounts — it does not include car loans, mortgages, or other installment loans where you pay a fixed amount each month.

Length of credit history: how long you have been borrowing

This factor measures the age of your oldest account and the average age of all your accounts. Someone who opened their first credit card at 18 and still uses it at 40 has a 22-year history. Someone who opened their first account last year has a one-year history. Longer is better, but this factor moves slowly — it only changes as time passes.

Opening new accounts can actually lower the average age of your accounts temporarily, which is one reason why opening many new cards at once can hurt your score. However, the impact is usually smaller than the impact of payment history or utilization.

Credit mix: having different types of credit

Credit mix means having a variety of credit types: revolving credit (credit cards, lines of credit) and installment credit (car loans, mortgages, student loans). Someone with only credit cards has less credit mix than someone with a credit card, a car loan, and a mortgage. Lenders see credit mix as a sign that you can handle different kinds of borrowing.

This factor accounts for a smaller piece of your score than payment history or utilization. You should not open accounts you do not need just to improve your mix — the hard inquiry and new account will temporarily lower your score, and the benefit of better mix is modest. However, if you already have different types of credit, that works in your favor.

New credit inquiries: recent requests for credit

When you apply for a credit card, loan, or other credit product, the lender checks your credit report. This is called a hard inquiry and it shows up on your report and affects your score. Multiple hard inquiries in a short time (usually within 14 to 45 days, depending on the scoring model) may be counted as a single inquiry if they are for the same type of credit — for example, if you shop around for a car loan from several lenders in two weeks.

A hard inquiry typically lowers your score by a few points and stays on your report for two years, though its impact on your score fades after a few months. Soft inquiries — when you check your own credit, or when a company checks it to pre-screen you for an offer — do not affect your score at all.

How these factors work together

Your score is not a simple average of these five factors. Payment history and utilization carry much more weight than the others. This means that if you pay every bill on time and keep your credit card balances low, you can have a strong score even if you have a short credit history or few accounts.

Conversely, a single missed payment or a sudden spike in credit card balances can lower your score significantly, even if everything else is in good shape. The score is designed to predict whether you will pay back borrowed money, so the most recent and most dramatic evidence of your behavior matters most.

Frequently Asked Questions

Does checking my own credit score hurt it?

No. Checking your own credit report or score is a soft inquiry and does not affect your score. You can check it as often as you want without any penalty. You are may have access to to one free credit report per year from each of the three major bureaus through annualcreditreport.com.

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

A late payment stays on your report for seven years from the date you missed the payment. However, its impact on your score weakens significantly after two to three years, especially if you have paid on time since then. After seven years, it falls off automatically.

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

Not yet, but you can build one. You need at least some credit accounts and a history of on-time payments. A secured credit card (one backed by a cash deposit) or being added as an authorized user on someone else's account are common starting points. It typically takes several months to a year of on-time payments before you have enough history for a traditional score.

Does paying off a credit card hurt my score?

Paying off a balance lowers your utilization, which usually raises your score. However, closing the account after you pay it off can hurt your score slightly because it reduces your total available credit and shortens your average account age. Keeping the account open and using it occasionally is better for your score.

What is a good credit score?

FICO scores range from 300 to 850. Generally, 670 and above is considered good, 740 and above is very good, and 800 and above is excellent. However, different lenders have different standards — some will lend to people with scores in the 600s, while others require 700 or higher. The score matters less than what you are trying to do with it.