Your credit score is a three-digit number calculated from information in your credit reports. It influences loan approvals, interest rates, apartment applications, and sometimes employment decisions. Five categories of information drive the calculation, weighted differently in importance.
The Five Factors (FICO Model)
- Payment history: 35%
- Amounts owed (utilization): 30%
- Length of credit history: 15%
- Credit mix: 10%
- New credit: 10%
Payment History (35%)
This is the single largest factor. Every on-time payment helps; every late or missed payment hurts. A single 30-day late payment on an otherwise excellent file might drop a 780 score by 60 to 110 points. Late payments stay on your credit report for seven years. Their impact diminishes over time, but it does not disappear until the seven-year mark. Set up autopay for at least the minimum payment on every credit account.
Amounts Owed / Credit Utilization (30%)
Credit utilization is the ratio of your total credit card balances to your total credit limits. Lower utilization scores better. The general guidance is to keep utilization below 30%, with below 10% being optimal for scores above 750. Utilization is calculated at statement close, not payment due date. To lower reported utilization, pay the balance down before the statement closing date. Utilization has no memory; it resets every month based on current balances. This is the fastest lever for improving a score held down by high balances.
Length of Credit History (15%)
This factor considers the age of your oldest account, the age of your newest account, and the average age across all accounts. Keep old accounts open even when you stop using them. A 10-year-old credit card that carries no balance is doing work for your score through its age. Closing it removes that history from the average account age calculation and eliminates the credit limit from your utilization calculation.
Credit Mix (10%)
Lenders want to see that you can handle different types of credit responsibly. A credit file with only credit cards is less diverse than one that includes a mortgage, an auto loan, and credit cards. Do not take out a loan just to diversify your credit mix. This factor matters most when everything else is equal.
New Credit (10%)
Each credit application triggers a hard inquiry, which typically drops your score by 3 to 5 points for up to 12 months. Rate shopping for a single loan within a compressed window (typically 14 to 45 days) is treated as a single inquiry, so comparing offers does not compound the impact. Opening multiple new accounts in a short period is a negative signal.
What Does Not Affect Your Score
- Income: credit scores contain no income information
- Age: your age is not a factor; account age is different
- Checking your own score: soft pulls do not affect your score
- Debit card usage: not reported to credit bureaus
- Bank account balances: invisible to credit bureaus
Score Ranges and What They Mean
- 800 to 850: Exceptional, qualifies for best available rates
- 740 to 799: Very Good, near-best rates on most products
- 670 to 739: Good, standard rates, most products accessible
- 580 to 669: Fair, higher rates, some products unavailable
- Below 580: Poor, limited options, highest rates
Practical Priorities
Pay everything on time, keep utilization low, and keep old accounts open. These three practices, consistently maintained, build and protect a strong score over time. The other factors are worth understanding but rarely require active management beyond not applying for credit frivolously.
