Home > Credit Score > The 5 Things That Affect Your Credit Score

Comments 8 Comments

Knowing your credit score is an important part of managing and maintaining your financial health, but knowing the score alone isn’t enough. It’s also important to understand how your credit score is calculated and the key factors that are used in the calculation. Without understanding the core foundation of how credit scores read and interpret your credit report data, you have no way of knowing whether or not your financial habits are helping — or hurting — your credit score.

Top 5 Factors That Affect Your Credit Score

1. Payment History

Your payment history accounts for 35% of your credit score — more than any other single factor. If you pay your bills on time and never miss a payment, you are rewarded and will do well in this category. If you have a history of missing payments or paying late, you will not.

Negative Traits: Late payments, missing payments, charge-offs, collections, judgments, liens, foreclosures, bankruptcy. If you have missed a payment, or have been late in the past, the best advice is to get current and stay current. The longer you pay on time, and the older the late payments get, the less impact they will have.

2. Debt

Are you carrying a lot of debt? How much do you debt do you owe? Your debt accounts for 30% of your credit score — almost as much as your payment history. Some debt is good, but too much debt can hurt you — especially credit card debt.

Negative Traits: High credit card balances, maxed out credit cards, too many accounts with balances — all of these characteristics point to high credit risk and will negatively impact your score.

3. Length Credit History

How long have you had credit? This factor accounts for 15% of your credit score and looks at your track record of having credit accounts and managing them well over time. The longer you’ve had credit, the better.

Negative Traits: Very new or recently opened accounts, or little to no history of credit. Unfortunately, the only thing that can build your credit score in this category is time. If you have recently opened an account you’ll need to give it time to age before you’ll see a positive effect from the account’s history in your credit score.

4. New Credit

How often you apply for credit accounts for 10% of your credit score. Every time you apply for credit an inquiry will post to your credit report showing that you’re actively searching for credit. Excessively shopping for credit and too many inquiries in a short period of time can hurt your score.

Negative Traits: Applying and opening too many accounts in a short period of time. By law, inquiries remain on your credit report for 24 months — but only inquiries in the last 12 months will be counted in your credit score.

5. Credit Mix

The types of credit you have accounts for the remaining 10% of your credit score. This includes credit cards, auto loans, mortgage loans — and having a healthy mix will insure you score well in this category. Having too many, or only one type of account can actually hurt you in this category. When it comes to credit scores, diversity is key and credit scoring models like to see that you can maintain and manage a number of different types of credit accounts.

Negative Traits: Having only one type of credit account (all revolving/credit cards, for example), having a finance company account, or not having a mortgage loan account can all negatively affect your credit score in this category.

Now that you know the core factors that affect your credit score you should be able to use what you’ve learned to maximize your own credit score. You can use Credit.com’s Credit Report Card to get your score and monitor your credit-building progress — for free. After all, having an excellent credit score can make all the difference in the world when it comes to your personal financial options.

Image: D. Sharon Pruitt, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Diana Georgieva

    is it better to close credit cards that are not used but are old (long history) or shall I still keep them open even no longer used?

    • http://www.Credit.com/ Gerri Detweiler

      Best to keep them open unless they are charging you an annual fee you don’t want to pay.

  • Pingback: The Leprechaun-Free Way to Get a Pot of Gold « Jeanne Kelly Credit Coach()

  • Pingback: The Ultimate Guide to Credit Scores | Credit.com News + Advice()

  • Pingback: The Leprechaun-Free Way to a Pot of Gold | Credit.com News + Advice()

  • ty

    how will adding my name to a mortgage already in my wife’s name for over 2 years impact my credit score? The mortgage has been current the whole to years. Meaning no late payments.

    • Gerri Detweiler

      Ty – Very likely soon after you are added to the account the entire account history will start appearing on your credit reports. That will likely be a good thing since she has always paid on time.

  • Cindy

    It says that having a finance company account can negatively affect your credit. Is this true or am I reading it wrong? What if the finance company account is paid in a timely manner? I recently got one and they told me it would better my credit, not harm it. Please advise. Thanks

    • http://www.Credit.com/ Gerri Detweiler

      It can depending on how it is reported and the scoring model being used. But don’t panic. Order your free annual credit reports to see how the account is being reported.

  • Pingback: The 5 Things That Affect Your Credit Score » Wordpress Real Estate 5()

  • Pingback: Achieving Perfection – the Highest Credit Score | ComparePlastic()

  • Pingback: The Highest Credit Score | Credit.com News + Advice()

  • Pingback: The 5 Things That Affect Your Credit Score()

  • Sherri

    I can’t believe you’re advising your readers they always need to have a mortgage balance to have good credit. Ours will be paid off next year and that’s one debt we will never have again. Unbelievable advice!

    • Deanna Templeton

      Hi Sherri — I understand and respect your opinion, but I think it’s important to point out that the purpose of this article was to illustrate the facts and how credit score rate your credit report data — including what affects your score both positively and negatively. When it comes to the FICO score model, the history of a mortgage tradeline earns more score points and is viewed as “positively.” No where in this article did I advise that readers “always need to have a mortgage balance to have good credit.” Plenty of consumers without mortgages have perfectly good credit scores, and credit mix is only a small portion (10%) of your total credit score. I have never, nor will I ever, advise anyone to overextend themselves by taking on a mortgage loan that they cannot afford. Owning a home is personal decision and individual financial situations should absolutely be part of the decision process.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team