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What Affects Your Credit Score?

October 9, 2019 6 mins

It’s important to understand your credit score, how to check it, and how to maintain a good credit score and credit history.

You may know that credit scores typically range from 300 to 850, and you may have some idea of the habits that will get you a better score. But do you know what the top two factors are? Keep reading to find out – along with what to do to maximize your score in those areas, and what the other factors are.

You can also learn more about the basics including what is a credit score and how to check your score for free.

FICO and VantageScore, the two most common sources of credit scores, both indicate that your payment history is the most important factor in your overall score.”

Your payment history is the most important factor in your credit score

When you pay your bills and loans on time – including by making the minimum payment or paying your balance in full – your credit score goes up. When you don’t pay on time or when you pay less than the minimum payment, it goes down. FICO and VantageScore, the two most common sources of credit scores, both indicate that your payment history is the most important factor in your overall score.

Maximize your score by paying your bills

Pay all your bills on time, and pay at least the minimum balance. The less you pay (below the minimum) and the later you pay, the more your score will go down.

To pay your bills on time, mark your calendar with a reminder. Use online banking or Bill Pay to set up recurring payments. Ask your creditor if they will change your due date so it matches when you get your paycheck. Many banks and credit unions also set up the ability to have your credit card automatically paid in full each month out of your checking account – even an account at a different institution.

The amount of credit you use is the second most important

Known as “credit utilization,” the amount of your available credit that you actually use is the second most important factor in your score, according to FICO and VantageScore. In a nutshell, your credit utilization is the percentage of your credit limit that you use at any one time.

For example, if your total credit limit across your credit cards and other loan accounts was $12,000 and you had outstanding balances totaling $4,000, your credit utilization would be 33%. In this example, the utilization of 33% is slightly higher than the recommended maximum of 30%.

How to maximize your score by limiting your utilization

Use no more than 30% of your available credit at any one time. Keeping tabs on your total balances owed, setting up automated balance alerts via text or email, or making extra payments before your due date are all ways to stay under 30%.

Four other factors in your score

There’s a few other factors that also affect your score, and these are worth paying attention to, but they don’t affect your score nearly as much as the main two factors.

Your total debts owed

The total amount owed in debt will affect your score, and your score will be better if your total debt – especially for unsecured loans like credit cards – is going down over time.

The length of time since you last applied for debt

Every time you apply for a loan or credit card, this creates a “hard inquiry” on your credit report – which lowers your score by several points. Over time, these inquiries fall off, and other factors may raise your score again. In general, it’s not a good idea to apply for too many new loans too close together.

The length of time your loan accounts have been open

The longer your loan and credit card accounts have been open, the better your score. That’s why it’s often a good idea to keep old accounts open unless there’s some good reason to close them, such as a temptation to overspend using that account or a very high annual fee.

Your credit mix

Typically, it’s best to have a mix of credit types – including accounts with a fixed number of payments (like car loans and mortgages) along with accounts with variable payments like credit cards.

What doesn’t affect your credit score

Not all financial actions affect your credit score. Here’s some things that won’t affect your score (although some of these may appear on your credit report and/or be available to companies that check your credit):

  • Soft credit checks – A soft inquiry, also known as a soft credit check or soft credit pull, happens when you view your own credit report, or someone you authorize, like a potential employer, checks it. Soft credit checks also happen when financial institutions check your credit to preapprove you for a loan offer. Because they are not tied to a specific application for credit, soft credit checks don’t impact your credit score.
  • Checking your own score – As noted above, viewing your own credit report won’t affect your score. Depending on the source, your credit report may or may not include your credit score. In any case, whether you’re checking your own report or your own score or both, , it does not affect your score.
  • Rent – In most cases, your rent payments and your utility payments are not reported to the credit bureaus, so they do not count toward your score. The exception is if you use a rent-reporting service or if you are late on utility payments. The utility company may charge it off or sell it to a collector, who can report it to the credit bureaus and hurt your score. Some new products, such as Experian Boost, allow you to add utility payment information to your Experian credit report, which can influence your credit. Income and bank balances: Credit reports do include some employer information, but it’s used only to match account data to the
  • Utility payments – Typically, utility payments are not reported to credit bureaus, so they do not affect your score. However, if you pay your utility payments late or not at all, this may end up affecting your score, especially if the utility company charges off the debt or sells it to a collector. Debt collectors can report this to the credit bureaus and hurt your score.
  • Your income – While creditors may consider your income to determine if you can pay back a loan, it’s not something that affects your credit score itself. And while credit reports may include some information about your current job and/or job history, this is typically used to match the account to the right person. Therefore, getting a raise or a second job to supplement your income won’t increase your score.
  • Your checking, savings, and investment account balances – Since credit reports list only credit accounts — not checking, savings, or investment accounts — your balances there won’t help your score. However, these may still be factors that lenders look at, particularly for large loans such as mortgages.


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