The two most important things that affect your credit score are how well you pay your bills and how much of your credit limit you use.
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Your credit score is based on many things, like how well you pay your bills on time, how much of your available credit you use, and how long you’ve used credit. Knowing the things that affect your credit score can help you figure out the best way to build and protect it.
Credit scoring companies calculate your scores from data in your credit reports. While they won’t reveal their exact formulas, they share the basic ingredients they use to calculate scores.
Why do you care? Because your credit often holds the key to other parts of your life: whether you can get a credit card or car loan, and at what interest rate; whether you can buy a house or rent the apartment you want; even how much you pay on car insurance and utility deposits.
In terms of money, your credit score is one of the most important numbers. It changes your chances of getting credit cards, loans, mortgages, rental applications, and other things. It also changes the terms and interest rates you’ll be offered. That’s why it’s so important to know what has the most effect on your credit score.
After looking at the two most popular credit scoring models, FICO® and VantageScore®, three main things stand out as having the most impact on your credit score.
1. Payment History
How you’ve paid your credit accounts in the past has the single biggest impact on your credit score, Payment history makes up 35% of your FICO® score and 40% of your VantageScore®,
Every month that you make on-time payments is a positive mark on your credit history. But if you miss payments, pay late, or have any accounts sent to collections, it can severely damage your credit. Just one 30-day late payment can drop your score by 50-100 points.
To maximize this important factor:
- Pay all credit accounts on time every month
- Set up autopay or reminders to avoid missed payments
- Don’t let any accounts fall into delinquency or collections
Striving for a perfect payment history over time will go a long way in building an excellent credit score.
2. Credit Utilization
Your credit utilization ratio compares how much credit you’re using against your total available credit limits. It makes up 30% of your FICO® score and 20% of your VantageScore®.
The lower your credit utilization, the better it is for your credit score. Experts recommend keeping your utilization below 30%, and the highest scores tend to have utilization under 10%.
You can improve your utilization quickly by:
- Paying down balances, especially on high limit cards
- Asking for credit limit increases
- Opening a new account to increase total limits
Getting your utilization as low as possible will maximize this key scoring factor.
3. Credit History Length
The third biggest factor is the length of your credit history, accounting for 15% of your FICO® score. In general, the longer your credit history, the better.
You can build this factor over time by:
- Keeping old credit accounts open (as long as there’s no annual fee)
- Letting closed accounts age on your reports (they remain for 10 years)
- Becoming an authorized user on someone else’s long history account
While you can’t speed up time, avoiding account closures preserves your credit history length.
Other Important Credit Score Factors
While the above three factors have the most weight, other elements contribute to your credit score as well:
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Credit mix – Having a variety of credit types, like mortgages, credit cards, student loans, etc. This is 10% of your FICO® score.
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New credit – Applying for a lot of new credit at once can ding your score in the short term. This is 10% of your FICO® score.
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Credit inquiries – Each application for credit results in a hard inquiry, which can lower your score a few points. Shopping for mortgages or auto loans within a short period counts as one inquiry.
Though smaller components, these other factors are still worth being aware of as you manage your credit.
Tips for Improving Your Credit Score
You now know what has the most effect on your credit score. Here are some ways to raise it:
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Check your credit reports and dispute any errors. Mistakes can negatively affect your score.
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Become an authorized user on a credit card with good standing to benefit from its history.
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Limit new credit applications to avoid too many hard inquiries.
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Ask for credit line increases over time to keep utilization low.
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Create a budget to ensure you can make timely payments each month.
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Use balance transfer or personal loans to consolidate high credit card balances.
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Sign up for credit monitoring to stay on top of your reports and scores.
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Be patient. Building credit takes time. Stick to good habits.
Pay attention to the important things, like payment history and utilization, and your credit score will slowly go up. Keep track of your progress to see how your actions affect this important number.
The kinds of credit you have, or credit mix
Its best to have a mix of installment accounts — those with a set number of equal payments, such as car payments or mortgages — and credit card accounts.
- What to do: Having a good mix of at least five accounts is a sweet spot for credit scoring. Anything less can create a thin credit file, which can make generating a score difficult. Having this goal in mind as you’re building credit can strengthen your score.
What affects your credit scores the most?
The two major scoring companies in the U.S., FICO and VantageScore, differ in how they weight the factors in the calculations, but they agree on the two factors that are most important: Payment history, or your record of paying your bills on time, and credit utilization, which is the portion of your credit limits that you actually use. Together, these two factors make up more than half of your credit scores.
Heres a breakdown of all the factors that affect your scores:
The Three Biggest Factors That Impact Your Credit Score
FAQ
What has the highest effect on credit score?
Payment history: The biggest factor in determining your credit score is payment history. Every time you pay a credit card bill, car payment, house payment, student loan payment, etc. , it gets added to your history. It’s important that all of your payments are paid before the due date listed on your statement.
What is the biggest factor on credit score?
Payment history — whether you pay on time or late — is the most important factor of your credit score making up a whopping 35% of your score.
Which activity has the greatest impact on your credit score?
Payment history (35%): Payment history is the most important factor in your FICO Score and shows how you’ve managed your debt payments over time. Amounts owed (30%): FICO Scores focus on your credit utilization, or the amount of revolving credit you use, especially with credit cards.
What has the biggest impact on your credit score on EverFi?
What Factors Impact Your Credit Score?35% — Payment history: Always make those payments on time!30% — How much you owe: Also known as credit utilization, this means the more credit you’ve used in relation to how much credit you have, the lower your score may be.