Your credit score is calculated from information in your credit report. Understanding what goes into that calculation — and in what proportion — lets you focus your attention where it actually moves the needle.
The FICO Model: Five Factors
FICO scores (used in the majority of lending decisions) are calculated from five components, each weighted differently. VantageScore, the other widely used model, uses similar inputs with slightly different weighting and methodology.
Payment History — 35%
The largest single factor. This reflects whether you’ve paid your bills on time. Every on-time payment reinforces a positive record. A single payment 30+ days late can drop a score significantly, particularly for people with otherwise strong profiles. The impact of a late payment diminishes over time — a late payment from 4 years ago matters less than one from 6 months ago — but stays on your report for 7 years.
The severity matters too: 30 days late is less damaging than 60 or 90 days late, which is less damaging than a collection account or charge-off. Recent lates hurt more than old ones.
Amounts Owed (Utilization) — 30%
Also called credit utilization, this measures how much of your available revolving credit you’re using. If your total credit card limits add up to $10,000 and you’re carrying $3,000 in balances, your utilization is 30%.
Lower utilization generally means a higher score. The conventional guidance is to stay below 30%, with below 10% being optimal. Utilization applies both overall (across all cards) and individually (per card). A single maxed-out card hurts even if total utilization is low.
Unlike payment history, utilization resets every month when your statement balance is reported. Pay down a high balance and your score can improve significantly within 30–60 days.
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 your accounts. Longer history with well-managed accounts is viewed positively.
This is why closing old accounts — even ones you don’t use — can lower your score. It may reduce your average account age and remove the positive history. Keeping old cards open with occasional small purchases maintains their benefit to this factor.
Credit Mix — 10%
Lenders prefer to see that you can manage different types of credit: credit cards (revolving), installment loans (auto, personal, student), and mortgages. Having a mix signals broader creditworthiness than having only one type of credit.
Don’t open new accounts just to improve your mix — the benefit is minor and the hard inquiry and lower average account age can offset it. Let the mix develop naturally over time as you use credit for real needs.
New Credit — 10%
Each new credit application creates a hard inquiry, which can lower your score by a few points temporarily. Opening several new accounts in a short period signals higher risk to lenders and can accelerate the score impact.
Soft inquiries — for pre-qualification, background checks, or personal credit monitoring — do not affect your score. Only hard inquiries (formal credit applications) have any impact, and that impact is small and temporary (most hard inquiries affect scores for only 12 months).
What’s Not in Your Score
Credit scores don’t consider income, employment status, bank account balances, age, race, gender, or marital status. Rent, utilities, and phone payments are generally not included unless you use a service that reports these (Experian Boost, Rental Kharma, etc.) or the lender uses a scoring model that incorporates them.
Score Ranges and What They Mean
- 800–850: Exceptional — best rates on any loan or card product
- 740–799: Very Good — competitive rates across virtually all products
- 670–739: Good — qualifies for most standard products with reasonable rates
- 580–669: Fair — limited options, higher rates
- Below 580: Poor — subprime lending only or secured products
Checking Your Score and Report
Your credit reports (from Equifax, Experian, TransUnion) are available free weekly at annualcreditreport.com. Your credit score itself is often available for free through your bank or credit card issuer — many provide it as a standard feature. Monitoring both the score and the underlying report data lets you catch errors and understand what’s affecting your number.
