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What Factors Affect Your Credit Score? A Comprehensive Guide
July 1, 2025
Understanding what influences your credit score is crucial for maintaining strong financial health. Whether you're aiming for a higher FICO Score or VantageScore, or simply want to maintain good credit, knowing these factors helps you make informed financial decisions. This comprehensive guide breaks down the five major components that determine your credit score, their relative importance, and how you can optimize each factor to improve your creditworthiness.
The Five Critical Factors That Shape Your Credit Score
While various credit scoring models exist, both FICO Score and VantageScore use similar factors to calculate your credit risk. Here's a detailed breakdown of these components, ranked by their impact on your overall credit score:
Payment History: The Foundation of Your Credit Score
Payment history typically accounts for about 35% of your FICO Score, making it the most crucial factor in determining your creditworthiness. This component encompasses:
- Credit card payments
- Installment loans payments
- Mortgage loan payments
- Store account payments
- Finance company accounts
Your payment history reflects how reliably you've repaid your debts. Late payments, especially those 60 or 90 days past due, can significantly damage your credit score. However, consistently making on-time payments can help strengthen your credit profile over time.
Payment History: The Foundation of Your Credit Score
Payment history typically accounts for about 35% of your FICO Score, making it the most crucial factor in determining your creditworthiness. This component encompasses:
- Credit card payments
- Installment loans payments
- Mortgage loan payments
- Store account payments
- Finance company accounts
Your payment history reflects how reliably you've repaid your debts. Late payments, especially those 60 or 90 days past due, can significantly damage your credit score. However, consistently making on-time payments can help strengthen your credit profile over time.
Credit Utilization: Balancing Your Available Credit
Credit utilization, which typically accounts for 30% of your score, measures the proportion of credit you're using compared to your available credit limits. This factor considers:
- Total balances and debt
- Credit utilization ratio across all accounts
- Individual account utilization
- Outstanding debt on various credit accounts
- Available credit limits
Financial experts recommend keeping your credit utilization ratio below 30%. For example, if you have a credit limit of $10,000, try to maintain a balance below $3,000 to optimize this factor.
Length of Credit History: The Value of Time
The age of your credit accounts makes up approximately 15% of your score. This factor evaluates:
- Age of your oldest account
- Average age of accounts
- Age of specific account types
- Length of time specific accounts have been open
- Recent account activity
A longer credit history generally results in a higher score, as it provides more data about your credit management habits. This is why financial advisors often recommend keeping old credit accounts open, even if you rarely use them.
Credit Mix: Diversifying Your Credit Portfolio
Your credit mix contributes about 10% to your score and includes:
- Revolving accounts (credit cards)
- Installment accounts
- Mortgage loans
- Credit-builder loans
- Store accounts
- Lines of credit
Having a diverse mix of credit types can demonstrate your ability to manage different types of credit responsibly. However, don't open new accounts solely for diversification – only apply for credit you actually need.
Recent Credit Activity: Managing New Credit
New credit activity makes up about 10% of your score and includes:
- Hard inquiries
- Credit applications
- Recently opened accounts
- Credit inquiries
- Authorized-user activity
Multiple credit applications in a short period can signal financial distress to lenders. However, when shopping for specific loans like mortgages or auto loans, multiple inquiries within a 14-day window typically count as one inquiry.
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Frequently Asked Questions About Credit Score Factors
How often are credit scores updated?
Credit scores typically update every 30-45 days as creditors report new information to the credit bureaus.
Can checking my own credit score hurt it?
No, checking your own score creates a soft inquiry which doesn't impact your credit score.
How long do hard inquiries stay on my credit report?
Hard inquiries typically remain on your credit report for two years but only affect your score for about 12 months.
Does income affect credit score?
No, your income isn't directly factored into your credit score, although it can affect your ability to manage credit responsibly.
How long does negative information stay on my credit report?
Most negative information stays on your credit report for seven years, while bankruptcies can remain for up to 10 years.
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Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
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