Influential Factors for Your Credit Score

Credit Score

Your credit score can be a very important number. It affects everything from renting or purchasing a home to buying a car or getting better insurance rates. A number that’s so important should be well understood. Unfortunately, there’s a lot of confusion about what plays a role in your score. Each company uses a slight variation, but five main factors influence your credit score.


When you check credit score, 35% of your FICO score is based on your payment history. Credit companies keep track of any late payments. Paying late can bring down your score and stay in your history for up to seven years. The later you pay and the greater the overdue sum, the more your score will suffer. Lenders want to know that they will be paid in full on time. Try setting up autopay or aligning due dates with your paydays if you have trouble remembering to pay. If you notice any errors in your history, don’t be afraid to dispute them.


The second most influential factor for your credit score is your credit utilization. FICO accounts utilization for 30% of your score. The ratio is determined by dividing how much credit you are currently using by your total credit limit. Ideally, you should keep your utilization below 30% to avoid negative marks. It’s best to stay even lower. You can accomplish that by closely watching revolving credit balances and making multiple payments before bills post. Damage from high utilization is much easier to reverse than late payments. Once your ratio goes back down, your score should bounce back up.


Having a diverse assortment of credit accounts contributes 10% to your FICO score. Lenders want to see that you can manage a variety of credit lines. There are two main types of accounts that creditors look for, installment and revolving

Installment Credit

Installment credit is when you borrow one set amount. That balance is generally paid back in monthly installments. You continue the regularly scheduled payments until the loan is paid in full. Examples include mortgages, car loans, and student loans.

Revolving Credit

There should be no surprise that revolving credit changes. It involves an open line of credit with an established maximum limit and monthly minimum payments. The balance fluctuates depending on your usage and payments; therefore, your monthly installments are also variable. Revolving credit is most commonly linked to credit cards and home equity loans.


The age of your credit history contributes 15% to your FICO score. Your credit score factors in your oldest account, newest account, and everything in between. Usually, the longer you’ve had accounts, the higher your score will be. That means closing old lines of credit can be disruptive to your score. Not only will it affect your utilization by decreasing your total credit limit, but it will also shorten the length of your history. 


Recent account activity provides 10% to your FICO score. Having too much new activity in your name quickly will flag you as a risk and potentially lower your score. Opening several new lines of credit or having a hard credit check both contribute. New accounts also lower the average age of your credit history. Many people worry that checking their credit score themselves will count as a credit pull. That is not the case, and you should routinely monitor your score for fraud and changes.

Credit scores are complex. Be sure to make on-time payments, keep utilization low, diversify your accounts, maintain old accounts, and be cautious of new activity. When in doubt, don’t be afraid to reach out to a professional for tips.

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