What goes into your credit score

Your credit score is a three-digit number built from five categories of information in your credit report. Each category carries a different weight. The largest factor is your payment history — whether you pay bills on time — which accounts for about 35 percent of the score. The second-largest is how much credit you are using compared to your limits, which accounts for about 30 percent. The remaining 35 percent comes from how long you have held credit accounts, the mix of different types of credit you carry, and how often you have recently applied for new credit.

The three major credit bureaus — Equifax, Experian, and TransUnion — each calculate your score using this same framework, but they may see different information about you. If one bureau has a late payment on record that another does not, your scores from each bureau will differ. Your score also changes whenever new information is reported to the bureaus, which typically happens once a month when creditors send updates.

Key Takeaways

  • Payment history makes up 35 percent of your score; a single late payment can lower it by 50 to 100 points depending on how late it was and your overall credit profile.
  • Credit utilization — the percentage of your available credit you are using — accounts for 30 percent; keeping this below 30 percent helps your score more than paying off balances completely.
  • The length of your credit history, the variety of credit types you hold, and recent credit inquiries together make up the remaining 35 percent.
  • Each of the three credit bureaus may have different information about you, so your score can vary by 50 points or more between them.
  • Your score updates as creditors report new information, usually monthly, so it changes over time as your behavior changes.

Payment history: 35 percent of your score

Payment history is whether you pay your bills by the due date. This includes credit cards, car loans, mortgages, student loans, medical bills sent to collections, and any other debt that is reported to the credit bureaus. A single payment 30 days late will lower your score. A payment 60 days late will lower it more. A payment 90 days late or longer will lower it significantly — sometimes by 100 points or more if your score was high to begin with.

The damage from a late payment fades over time. A late payment from seven years ago has less impact than one from last month. After seven years, most late payments fall off your credit report entirely and stop affecting your score. However, if you have a pattern of late payments, the damage accumulates and takes longer to recover from.

Accounts in collections, charge-offs, and bankruptcies also fall under payment history. These are more serious than a single late payment and can lower your score by 130 points or more. Like late payments, they gradually lose impact as they age, but they remain on your report for seven years (or ten years for bankruptcy in some cases).

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 $1,000 limit and a $300 balance, your utilization on that card is 30 percent. If you have multiple cards, the bureaus look at your total utilization across all cards as well as utilization on each individual card.

Keeping your utilization below 30 percent is better for your score than paying off your balance completely each month. This seems counterintuitive, but it is because the bureaus want to see that you can carry a balance responsibly without maxing out your limits. Utilization above 30 percent begins to lower your score. Utilization above 50 percent lowers it more. Maxing out a card — reaching 100 percent utilization — can lower your score by 50 points or more.

Utilization is calculated based on your balance at the time the credit card company reports to the bureaus, which is usually your statement closing date. Paying down your balance before that date will lower your reported utilization, even if you charge the balance back up after the report is sent. Requesting a credit limit increase also lowers your utilization percentage without changing your actual balance.

Length of credit history: 15 percent of your score

The bureaus look at how long your oldest account has been open and how long your accounts have been open on average. A longer history is better for your score. Someone with a credit card they have held for 15 years will have a higher score than someone with the same payment history but only two years of credit history.

This is one reason closing old credit cards can hurt your score — it removes a long account history from your record. Keeping old accounts open, even if you do not use them, helps your score. However, if an old account is costing you money in annual fees, the benefit to your score may not outweigh the cost.

Credit mix: 10 percent of your score

Credit mix means having different types of credit — credit cards, car loans, mortgages, student loans, and so on. The bureaus reward you for managing multiple types of credit responsibly. Someone with only credit cards will have a lower score than someone with the same payment history who also carries a car loan or mortgage.

You do not need to take out new debt to improve your credit mix. If you already have a mortgage and a credit card, you have a reasonable mix. Opening new accounts just to improve your mix will lower your score in the short term because of the hard inquiry and the new account, and the long-term benefit is usually small.

Recent credit inquiries and new accounts: 10 percent of your score

When you apply for credit — a credit card, a loan, a mortgage — the lender requests your credit report. This is called a hard inquiry. Each hard inquiry can lower your score by a few points. Multiple hard inquiries in a short time period can lower your score by 10 to 50 points, depending on your overall profile.

New accounts also affect your score. Opening a new credit card or loan lowers your average account age, which lowers your score slightly. The impact is largest in the first few months after opening the account. Over time, as the account ages, the negative impact shrinks.

Hard inquiries stay on your report for two years but stop affecting your score after about 12 months. New accounts stop having a large impact after about six months. This is why lenders recommend spacing out credit applications — applying for multiple cards or loans within a few weeks will lower your score more than spacing the applications out over several months.

How different credit bureaus calculate scores differently

Equifax, Experian, and TransUnion use the same five-factor framework, but they may not have the same information about you. A creditor might report to all three bureaus, to only one or two, or to none at all. This means your credit report can be different at each bureau, and your score can differ by 50 points or more between them.

You are may have access to to one free credit report from each bureau per year through AnnualCreditReport.com. Checking your reports regularly can help you catch errors — a late payment reported in error, an account that is not yours, or a balance that is reported incorrectly. If you find an error, you can dispute it with the bureau, and the bureau must investigate within 30 days.

Frequently Asked Questions

Does paying off my credit card in full hurt my score?

Paying in full is good for your payment history, but it can lower your utilization to zero, which is not ideal for your score. A utilization between 1 and 30 percent is better than zero. If you pay in full, try to let a small balance report before your statement closes, then pay it off after the statement is sent to the bureau.

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

A late payment stays on your report for seven years from the date it was first reported as late. It continues to affect your score during that time, but the impact decreases as it ages. After seven years, it falls off automatically and no longer affects your score.

Can I improve my score by becoming an authorized user on someone else's account?

Yes, if the account holder has good payment history and low utilization, becoming an authorized user can help your score. However, if the account has late payments or high utilization, it can hurt your score. Some credit card companies do not report authorized users to the bureaus, so check before relying on this strategy.

Does checking my own credit report lower my score?

No. Checking your own credit report is a soft inquiry and does not affect your score. Only hard inquiries from lenders lower your score. You can check your credit report as often as you want without any impact.

What is a good credit score?

Credit scores range from 300 to 850. Scores above 670 are generally considered good, and scores above 740 are considered very good. However, different lenders have different standards — some will lend to people with scores as low as 580, while others require 700 or higher.