What factors affect your credit score? (2024)

Your credit scores help sum up how risky it is to loan you money. If you want to apply for a new credit card, mortgage or any other type of loan, your credit scores will likely lay the foundation for whether you are approved or denied.

The most common credit scoring models are FICO and VantageScore. FICO scores have been around since 1989 — longer than VantageScores, which were developed by credit bureaus Experian, Equifax and TransUnion and launched in 2006.

Both VantageScore and FICO Score have multiple models, but the FICO Score 8 and the VantageScore 3.0 are the most relevant editions.

Each model has its nuances, but they all involve analyzing a range of data inputs about your financial history. Read on to learn what factors can affect your credit score, how often your score changes and what you can do to give it a boost.

Factors that impact your credit score

You make decisions about money every day, and credit scores use some of these actions to predict your likelihood of making payments on time. What factors affect your credit score? Below, we’ll outline the five main influencers for any version of your FICO score. Your VantageScore is calculated with similar information.

Payment history (35%)

Before a lender can feel comfortable about letting you borrow money, they’re going to want to know whether you have paid other lenders back on time. Your payment history carries the biggest weight in both your FICO score (35%) and VantageScore 3.0 (40%). If you have a late payment that has haunted your credit report, it will disappear after seven years, and its effect can decrease with time.

Amounts owed (30%)

Lenders also want to get a sense of how much money you’re paying other lenders. But the amount you owe across all your credit cards and loans doesn’t tell the full story. Even more important is the percentage of available credit you’re using on credit cards and other revolving lines of credit. On a credit card, your available credit is your credit card limit. If you’re close to maxing out your credit cards, you have a very high credit utilization, which can signal that you’re stretching your finances thin. Broadly, using no more than 30% of your credit limit is a good idea.

Credit history length (15%)

How long each of your accounts has been open, and your accounts’ average age, also affects your credit score. FICO looks at information including the date you opened your oldest account, the date you opened your newest account and the average age across all your accounts. The lesson from this piece of the credit scoring puzzle is simple: It’s often wise to keep your oldest account open, even if you aren’t regularly using it anymore, since closing that card can affect your credit score.

New credit applications (10%)

When you submit an application for a new loan or line of credit, your score might drop by a few points. If you apply for several credit cards or loans in a row, you’re more likely to see damage. FICO is more lenient when consumers apply for multiple mortgages, auto loans or student loans to compare rates. In these cases, try to submit all your applications within the same 14 days to limit the effect on your credit score.

Credit mix (10%)

Your credit mix refers to the types of loans you have. Installment loans such as mortgages, car loans and student loans provide lump sums that you’ll typically repay with fixed payments. With revolving loans such as credit cards and home equity lines of credit, you’ll be granted a credit limit, such as $25,000. With this limit, you can borrow as much as $25,000 at a time (though you should aim to keep your credit utilization much lower than 100%). As you pay down your balance, you can borrow again. Lenders like to see that you can handle paying both installment loans and lines of credit.

Ways to improve your credit score

If you’re looking to improve your credit score, there is no one-size-fits-all strategy.

“It can vary by each consumer’s unique credit profile,” said Tom Quinn, vice president of strategic alliances at FICO, so consumers should check their credit reports and FICO scores to help them craft a strategy. “If an individual is looking to improve their credit score quickly, generally reducing their reported credit debt is the best option.”

Consider these key tips to improve your credit score:

• Make every payment on time: Your payment history is the most important factor in your credit score. Set reminders in your calendar to make sure that your payments always arrive on or before the due date.
• Aim to keep your credit utilization ratio low: The amount of outstanding debt on all your credit cards and other credit lines versus your combined credit limit is your total credit utilization. By leaving more credit available, you’ll typically help your credit score. You can also consider asking your issuer for a credit limit increase, which can bring down your credit utilization.
• Avoid opening and closing accounts frequently: Carefully consider the pros and cons before opening or closing an account. Accounts that stay open longer and maintain good standing help your credit score.

How often credit scores change

Credit scores change when lenders submit new information to credit bureaus about your accounts. Credit card information is typically reported once a month to credit bureaus, Quinn said.

“If a consumer makes a sizable reduction in credit card balance,” Quinn said, “any associated impact on their score would surface when the issuer reports the updated information to the credit bureaus.”

Understanding credit score ranges

If you’re looking at your credit score and trying to figure out whether you have good credit, the answer may depend on the scoring model. Both FICO and VantageScore use ranges to group borrowers into different classifications.

FICO credit score ranges:

• 800+: Exceptional
• 740 to 799: Very good
• 670 to 739: Good
• 580 to 669: Fair
• Lower than 580: Poor

VantageScore ranges:

• 781 to 850: Excellent
• 661 to 780: Good
• 601 to 660: Fair
• 500 to 600: Poor
• 300 to 499: Very poor

While the ranges and terminology look a bit different between the two, the same principle applies across the board: The higher the number next to your name is, the better shape your credit is in.