Credit Score Basics: What Factors Affect Your Score Most

What Is a Credit Score?

A credit score is a 3-digit number (typically 300–850) that represents your creditworthiness — how likely you are to repay debts on time. The most widely used scoring model is FICO, created by the Fair Isaac Corporation. Lenders use your score to decide whether to approve your application and what interest rate to charge you.

Credit Score Ranges

• 800–850: Exceptional — Best rates, instant approvals, highest credit limits
• 740–799: Very Good — Near-best rates, easy approvals
• 670–739: Good — Average rates, most approvals
• 580–669: Fair — Higher rates, some denials
• 300–579: Poor — Very high rates or denials, secured cards only

The 5 FICO Score Factors Explained

1. Payment History (35%) — The Most Important Factor

Your payment history is the single biggest factor in your credit score. Even one 30-day late payment can drop your score by 50–100 points. The impact lessens over time — a late payment from 4 years ago hurts much less than one from last month. To maximize this factor: set up autopay for all accounts, even if just for the minimum payment.

2. Credit Utilization (30%) — The Fastest to Improve

Credit utilization is the ratio of your credit card balances to your credit limits. If you have a $10,000 limit and a $3,000 balance, your utilization is 30%. FICO rewards low utilization — ideally below 10%. This factor updates every month when your statement closes, making it the fastest way to improve your score.

3. Length of Credit History (15%)

This factor considers the age of your oldest account, the age of your newest account, and the average age of all accounts. Longer history is better. This is why you should never close old credit cards — even if you don't use them. Closing an old card reduces your average account age and your total available credit.

4. Credit Mix (10%)

Having a diverse mix of credit types — credit cards (revolving), auto loans, mortgages, student loans (installment) — shows lenders you can manage different types of debt responsibly. You don't need every type, but having both revolving and installment accounts helps.

5. New Credit (10%)

Every time you apply for new credit, the lender performs a "hard inquiry" that temporarily drops your score by 5–10 points. Multiple inquiries within a short period (rate shopping for a mortgage or auto loan) are treated as a single inquiry if done within 14–45 days.

The Biggest Score Killers

• Missed payment: -50 to -100 points
• Maxed-out credit card: -25 to -45 points
• Closing an old account: -10 to -30 points
• Applying for new credit: -5 to -10 points per inquiry
• Collections account: -50 to -110 points
• Bankruptcy: -130 to -240 points