The five factors that make up 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 paid bills on time — which accounts for 35 percent of the score. The second-largest is credit utilization, or how much of your available credit you are using, which counts for 30 percent. The remaining three factors are length of credit history (15 percent), credit mix — having different types of credit like cards and loans — (10 percent), and new credit inquiries (10 percent).
These percentages apply to the most common scoring model, called FICO. Other models exist — VantageScore is another — and they weight the factors differently. But FICO is what most lenders use when you apply for a mortgage, car loan, or credit card, so it is the one that matters most for housing and major purchases.
Key Takeaways
- Payment history makes up 35 percent of your score; a single late payment can lower your score by dozens of points and stays on your report for seven years.
- Credit utilization is 30 percent of your score; keeping your balance below 30 percent of your credit limit is better than paying off the card entirely each month.
- The length of your credit history, credit mix, and new inquiries together make up the remaining 35 percent, and changes in these areas have smaller immediate effects.
- Your credit report is the raw data; your credit score is the number calculated from it, and you can request your report free once per year from each of the three major bureaus.
How payment history affects your score
Payment history is the largest single factor because lenders care most about whether you paid past debts on time. The bureaus track every payment you made on credit cards, loans, and other accounts that report to them. A payment 30 days late hurts your score more than a payment 60 days late hurts it further, but both damage your score. A payment that is 90 days or more overdue causes serious harm.
Late payments stay on your credit report for seven years from the date you missed the payment, even if you pay it later. A payment marked late in 2024 will still appear in 2031. The impact gets smaller over time — a late payment from five years ago hurts less than one from last month — but it does not disappear until the seven years are up. Collections accounts, charge-offs, and foreclosures also stay for seven years and damage your score more severely than a single late payment.
How credit utilization works
Credit utilization is the percentage of your total 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 three cards with limits of $1,000 each and balances totaling $600, your overall utilization is 20 percent.
Utilization is calculated on the date the credit card company reports to the bureaus, usually your statement closing date. Paying off your balance in full before the statement closes means the bureau sees a $0 balance, which is actually worse for your score than carrying a small balance. Lenders want to see that you use credit responsibly, not that you never use it. Keeping your utilization between 1 and 30 percent is ideal. Utilization above 30 percent starts to lower your score, and above 50 percent lowers it more sharply.
Unlike late payments, utilization changes month to month. If you pay down a balance, your utilization drops and your score can rise within a month or two. This makes utilization the fastest factor to improve if you need your score to go up quickly.
How length of credit history and credit mix factor in
Length of credit history measures how long your oldest account has been open and also the average age of all your accounts. A person with a credit card opened in 2015 and a loan opened in 2022 has an average age of about 4.5 years. The longer your history, the higher this factor pushes your score. Opening many new accounts in a short time lowers the average age and can hurt your score temporarily.
Credit mix means having different types of credit: revolving credit like credit cards, and installment credit like car loans or mortgages. Having both types shows lenders you can manage different kinds of debt. A person with only credit cards will have a lower score than someone with cards and a car loan, all else equal. You do not need to take out a loan just to improve your mix, but if you are already borrowing, having variety helps.
How new credit inquiries affect your score
When you apply for a credit card, loan, or mortgage, the lender checks your credit report. This is called a hard inquiry and it lowers your score by a few points. Multiple hard inquiries in a short time can add up, but the bureaus understand that rate shopping is normal — if you apply for several mortgages or car loans within 14 to 45 days, they often count as a single inquiry for scoring purposes.
Hard inquiries stay on your report for two years but stop affecting your score after about three to six months. A soft inquiry — when you check your own credit or a company checks it for a pre-approved offer — does not lower your score at all. New credit accounts also lower your score slightly when you first open them, but the effect fades over time as the account ages.
Where your credit report comes from and how to read it
Your credit score is calculated from information in your credit report, which is maintained by three major bureaus: Equifax, Experian, and TransUnion. When you use a credit card, take out a loan, or miss a payment, the creditor reports that information to one or more of these bureaus. Each bureau builds its own report about you, and they do not always have identical information. This is why your score can differ slightly depending on which bureau's data is used.
You can request a free copy of your credit report from each bureau once per year at annualcreditreport.com, which is the official site run by the three bureaus together. The report lists every account, every payment, and every inquiry. It does not include your credit score — that is a separate number calculated from the report. Some credit card companies and banks show you your score free as a cardholder benefit, and many free credit monitoring sites show a score as well, though it may be a different model than FICO.
What scores mean in practice
FICO scores range from 300 to 850. A score of 670 or higher is generally considered good, and 740 or higher is considered very good. Scores below 580 are considered poor. Lenders set their own cutoffs — some will lend to anyone with a score above 620, while others require 700 or higher. For mortgages, a score of 620 is often the minimum to get a loan, but you will pay a higher interest rate than someone with a 740 score.
The exact interest rate you receive depends on your score, the type of loan, current market rates, and other factors like your income and down payment. A 50-point difference in your score can mean the difference between 6 percent and 7 percent interest on a mortgage, which adds tens of thousands of dollars over the life of the loan. This is why improving your score before applying for a major loan matters.
Frequently Asked Questions
Can I improve my credit score quickly?
The fastest improvement comes from lowering your credit utilization. If you pay down a credit card balance, your score can rise within one or two months. Disputing errors on your credit report can also help if the errors are removed. Paying off old late payments does not remove them from your report, but it stops new damage from accumulating.
Does checking my own credit score hurt it?
No. Checking your own credit is a soft inquiry and does not lower your score. Only hard inquiries from lenders when you apply for credit lower your score. You can check your score as often as you want without any penalty.
Why is my score different at different places?
Different credit bureaus may have different information about you, so your score can vary depending on which bureau's report is used. Additionally, different scoring models (FICO, VantageScore, etc.) weight the factors differently and produce different numbers. A lender may also use an industry-specific score, like a mortgage score, which emphasizes different factors than a general FICO score.
How long does a late payment hurt my score?
A late payment stays on your report for seven years from the date you missed the payment. It damages your score most severely in the first year or two, then gradually has less impact. After seven years, it falls off your report entirely and no longer affects your score.
Do I need to carry a balance to build credit?
No. You do not need to pay interest to build credit. Using a credit card and paying the full balance before the statement closes, so the bureau sees a small balance, is enough. Carrying a balance and paying interest does not build credit faster than paying it off.