Credit Score Factors


Several credit score factors can improve or lower your FICO grade.

Not knowing what those factors are or how to monitor them accurately can have serious consequences. Your score may drop significantly and, therefore, severely impact your creditworthiness. As a result, lenders, banks, and even rental agencies can reject your applications.

Learning more about the factors that have a severe credit score impact is one way to improve your overall financial health. So, read further to discover what those factors are and why they matter to financial institutions.

What Is Credit Score Based on?

Your payment history, credit utilization, credit history age, types of credit, and the number of inquiries all create your FICO score. The first two are the two factors that have the biggest impact, accounting for as much as 35% and 30%, respectively.

51% of Americans have never checked their credit score.

Payment History – 35%

Your payment history makes up the largest portion of your credit score and as such is one of the factors that affect credit score the most. This aspect has the biggest impact on credit score — 35%. It, therefore, shouldn’t be overlooked. Old payment history and on-time payments have a positive effect on your score. By contrast, missed and late payments lower it.

When you make late payments is also important. Covering an installment 30 days late is much better than doing so after 60 or 90 days.

Given its importance among credit score factors, your payment history must be in top shape. If you can’t pay on time, it’s better not to have any due payments at all. Frequent late and missed payments could result in a tax lien, bankruptcy, or foreclosure. These public records go into your credit reports, and will have a significant impact in the long run.

The best way to build a strong payment history is by planning your future payments, which will help you avoid one of the things that negatively affect a credit score. Add reminders a few days before any due dates on bills, installments and so on. Put money for upcoming payments you know of aside regularly. If possible, automate any installments (especially in the cases of weekly or monthly payments) to ensure everything is covered on time.

Credit Utilization – 30%

We have a reasonable credit utilization ratio next on the list of key factors affecting credit score. This is among the few aspects that can quickly decrease or improve your FICO grade. Credit utilization represents your credit debt against your allowed spending limit.

Rating charts recommend that you keep your debt ratio between 10% and 30%. As you can see, not using your cards is not recommended. It’s even worse to max them out. Rating bodies calculate both per-card and overall credit utilization. So, a balance transfer is always a smart step to keep both within the desired percentage ratio.

FICO score factors

Credit History Age – 15%

Credit history is another one of the factors affecting the credit score of Americans. Several aspects impact your financial history. Here, we have the age of your oldest and latest account alongside the average age of all your accounts. It’s also important whether you have used those accounts recently.

The right strategy towards keeping a healthy history depends on your situation. Opening a new account lowers the average age of your accounts. If you open it to get a better credit utilization ratio, the step may be smart. Closing accounts isn’t recommended. After ten years, closed accounts are removed from your records. This results in FICO lowering your three-digit score.

Types of Credit – 10%

Types of credit, or credit mix, is among the somewhat impactful factors of credit score. Some of the types that exist are installment, charge, service, and revolving credit. Having multiple of these improves your credit mix and, therefore, your FICO grade.

It’s important to note that with a 10% contribution, this is a minor factor in your financial health. So, you shouldn’t try too hard to keep it versatile. If you want to improve your score, it’s better to focus on your payment history and credit card debt ratio.

Number of Hard Inquiries – 10%

Talking about things that hurt your credit score, we have hard inquiries. Unlike soft pulls that are for informative purposes only, hard pulls are used by lenders and utility providers. Hard inquiries show that you need money or that you plan to increase your debt or expenses.

A hard inquiry can decrease your FICO rating by around five points. The exact number may be lower or higher, depending on other factors. Hard pulls stay on records for 24 months, but negatively impact them for about 12 months.

VantageScore Credit Grade Factors

Vantage score factors

Please note that the VantageScore rating model works slightly differently than FICO. Read on for the VantageScore factors that determine a credit score and their respective impact.

  • Payment history – 40%
  • Age and type of credit – 21%
  • Credit utilization ratio – 20%
  • Total debt – 11%
  • Recent credit behavior – 5%
  • Available credit – 3%

As you can see, these are similar to the FICO grading chart. The only difference lies in the amount of impact on Americans’ financial ratings. Also, this chart doesn’t include hard inquiries, but these are covered in the recent credit behavior category.

Only 1.2% of Americans can boast with a perfect score of 850.

What Most Impacts Your Credit Score?

Both FICO and VantageScore consider late and missed payments as the most important factors. Your payment history accounts for 35% and 40% in the FICO and VantageScore rating charts, respectively.  Paying your bills on time, therefore, boosts your financial health more than any other factor.

What Lowers Your Credit Score?

What lowers your credit score

Actions that reveal irresponsible behavior or signal cash shortage can lower FICO and VantageScore ratings.  You can consider such activities as indirect factors. Some of them are:

  • Missed or late installments
  • Credit debt of over 30%
  • Closing old accounts
  • Amassing personal debt
  • Having a public record
  • Multiple hard pulls on a credit record
  • Getting several loans at once

Any action that reveals you need money or signals increased current or future expenses negatively affects your credit score. 

What Are the Parameters of Good and Bad Credit?

The four primary credit score levels are bad, fair, good, and excellent. Their respective point ranges are 300-629, 630-689, 690-719, and 720-850. Further classification states that anyone with a score of 800 or more has an exceptional grade. Those with 599 or fewer points have a very poor rating.

Why Are Credit Rating Factors so Important?

Understanding how the credit score factors chart works is crucial for maintaining a good FICO grade. Each of these factors represents a different aspect of your financial health. When combined, the elements give a realistic image of where you stand regarding money, debt, and creditworthiness.

The average FICO score among Millennials was 679 in 2020.

Why Is Your Amount Owed Considered When Determining Your Credit Score?

Your credit utilization, with a hefty contribution of 30%, is among the most important factors here. The number is calculated by comparing the amount you owe versus your spending limit. That’s why your credit debt can either hurt or improve your FICO score, depending on how big it is.

Remember, both the amount owed on any individual accounts you may have and your total debt are ultimately among the things that affect your credit score. This means that you must monitor all your accounts and avoid maxing any of them out. Otherwise, you are sending a signal that you need money you don’t have. This flags you as a person bound to pay installments late or skip paying them altogether.

Final Words on FICO Score Factors

Your credit grade is checked whenever you want to get a loan, apply for a mortgage, or rent a property. That’s why it’s crucial to maintain a strong FICO rating and expand your options in life.

Before reaching a good credit score, however, you must put some real effort towards the goal. That’s possible only by knowing what affects a person’s financial reputation.

Our expert guide on credit score factors has all the information you need to start improving your FICO score right now.


Why is a credit score important?

If you want to qualify for loans and mortgages, you need a good credit score. Additionally, people with excellent and exceptional FICO ratings get access to the best loan deals. 

In other words, your three-digit grade represents your creditworthiness. So, a bad one can significantly limit your options when it comes to buying a car or renting an apartment.

What affects your credit score?

Payment history and credit utilization have the biggest impact. The list goes on with credit age, credit mix, and hard pulls. Please note that each of these has different factors that impact them. 

For a positive payment history, for example, you must pay everything on time. For ideal credit utilization, on the other hand, you should use only 10-30% of your spending limit.

What hurts your credit score?

Late and missed payments, along with a debt ratio of over 30% seriously damage your credit score. Credit age meanwhile is vital for building a good rating. Closing old accounts and opening new ones, therefore, hurts your FICO grade. Finally, hard inquiries decrease your credit score by around 5 points.

What factors determine your credit score?

Payment history, credit utilization, credit age, credit mix, and the number of inquiries. The former two have the most significant impact of 35% and 30%, respectively. Your credit age affects the FICO score with 15%, while the rest have a contribution of only 10%.

Which section on your credit report could cause the most damage to your credit score?

Your payment history comprises 35% of your FICO score. It is, consequently, the most crucial factor. Payment history includes analysis of late vs. on-time payment, length of history, and public records like foreclosure or bankruptcy.

What are some ways in which long-term purchases can affect your credit score?

If you take a loan for such a long-term purchase, the hard inquiry that happens as a result will lower your score, albeit temporarily. Long-term purchases can further lead to a personal debt which also a negative credit score impact. 

So, to sum up, long-term purchases are among the most essential credit score factors. That said, once you start making regular payments and building your credit history, such long-term purchases will become a positive thing.

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