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5 Factors That Make
Up a Credit Score

July 1, 2025 | 7 min read

Jose Rodriguez Owner of Got Credit? The Credit Dude

 

Fix Your Credit Today

Understanding what makes up your credit score is one of the most important financial skills you can develop — and yet, it’s something most people were never taught in school. Your credit score isn’t just a number; it’s a reflection of your financial reputation and a powerful tool that can either unlock opportunities or hold you back.

Credit scores — most commonly calculated using the FICO scoring model — range from 300 to 850. They’re used by lenders, landlords, insurance companies, and even some employers to measure how likely you are to repay what you owe. A higher score signals lower risk to lenders, which can qualify you for the best interest rates on everything from mortgages to car loans, and can even determine whether you’re approved for a rental apartment or certain types of insurance.

In contrast, a poor credit score can mean paying thousands of dollars more in interest over your lifetime, getting denied for financing when you need it most, or missing out on important life milestones like homeownership.

What many people don’t realize is that your credit score doesn’t just magically appear — it’s carefully calculated using information reported by creditors to the three major credit bureaus (Equifax, Experian, and TransUnion). Every month, these bureaus receive updates on how you’re managing your credit accounts, and your score is adjusted accordingly.

But what exactly goes into your credit score? While every scoring model has slight variations, for most consumers the FICO score boils down to five critical factors — each carrying a different level of importance. These factors don’t just affect your credit score in isolation; they interact with each other, meaning improvement in one area can sometimes offset weaknesses in another.

Here’s a detailed breakdown of the five key factors that determine your credit score — and why understanding each one is essential if you want to take control of your financial future, qualify for better rates, and save money over time.

 

Payment History (35% of Your Score)

Your payment history is the most influential component of your credit score, making up a massive 35% of your total FICO score — more than any other factor. This part of your score answers one critical question lenders have: “Can we trust you to pay back what you borrow — and will you pay on time?”

When creditors report your payment activity to the three major credit bureaus (Equifax, Experian, and TransUnion), they include whether you paid each account by the due date, how many days late you were if you missed a payment, and whether any accounts have gone into collections or been charged off entirely.

Here’s what payment history specifically tracks:

On-time vs. late payments – Even a single late payment (typically reported once it’s 30 days past due) can cause your score to drop anywhere from 50 to 100 points, depending on your overall credit profile. The more recent the late payment, the more it can hurt.

Severity of delinquencies – 30-day, 60-day, 90-day, and 120+ day late payments each have escalating negative effects. The longer an account goes unpaid, the more damage it causes.

Collection accounts – If an account is sold to a collection agency, it will be listed on your credit report as a collection account. Collections are some of the most damaging items on a credit report.

Public records – Bankruptcy, foreclosures, tax liens, and civil judgments also fall under payment history and can have long-lasting impacts, remaining on your credit report for up to 7-10 years.

Re-established good credit – On the positive side, recent positive payment patterns — especially after past delinquencies — can gradually improve your score as you demonstrate reliability.

 

Why Payment History Matters So Much

Lenders see your past payment behavior as the best predictor of future behavior. A long, consistent track record of paying on time reassures creditors that lending to you is low-risk. Conversely, any sign of difficulty managing payments signals higher risk, which can mean higher interest rates or outright denials.

 

How Long Do Late Payments Hurt?

• A late payment will stay on your credit report for up to 7 years.

• However, its impact on your score lessens over time if you re-establish good payment habits.

• The first 24 months after a late payment are typically when it affects your score the most.

   

Quick Tips to Improve or Maintain a Strong Payment History

🔹 Pay at least the minimum on every account — every month — by the due date.
Missing the minimum payment triggers a late mark even if it’s just one day late.

🔹 Use automatic payments whenever possible.
Setting up autopay for at least the minimum ensures you never accidentally miss a payment.

🔹 Set multiple reminders.
Use your phone, calendar apps, or budgeting tools to remind you at least a week before due dates.

🔹 Communicate with creditors immediately if you’re struggling.
Many lenders will offer hardship programs or temporary payment plans if you reach out before missing a payment.

🔹 Bring delinquent accounts current ASAP.
Even if an account is already late, catching up quickly minimizes further damage and starts the clock on rebuilding positive history.

🔹 Prioritize payments strategically.
If you can’t pay everything, focus on accounts already past due or closest to being reported as 30+ days late.

🔹 Monitor your credit report.
Check your reports regularly at AnnualCreditReport.com to ensure payments are being reported accurately.

 

Because payment history carries more weight than any other factor, maintaining perfect or near-perfect payment behavior is the fastest way to build and keep a strong credit score. Even if your credit is currently damaged by late payments or collections, creating a new streak of on-time payments can gradually restore your score and demonstrate to lenders that you’re a reliable borrower.

 

Amounts Owed / Credit Utilization (30% of Your Score)

The second most important factor in your credit score is the amount you owe relative to your total available credit — known as your credit utilization ratio — which makes up 30% of your FICO score. Unlike payment history, which focuses on whether you pay on time, this factor looks at how much of your credit you’re using right now compared to your limits.

What Is Credit Utilization?

Your credit utilization ratio is calculated by dividing your total revolving debt (mainly credit card balances) by your total revolving credit limits, then multiplying by 100 to get a percentage.

For example:

• Total credit limits: $10,000

• Current credit card balances: $2,500

• Utilization ratio: ($2,500 / $10,000) x 100 = 25%

Why Does Credit Utilization Matter?

Credit utilization shows lenders how dependent you are on revolving credit. A high utilization ratio indicates potential financial stress and a higher risk of default, since maxed-out cards can signal you’re relying on credit to make ends meet. In contrast, low utilization suggests you use credit responsibly and have plenty of available capacity.

Key points:

• Utilization applies only to revolving credit, like credit cards and lines of credit — installment loans (e.g., auto or personal loans) don’t factor into utilization calculations.
• Credit scoring models calculate both overall utilization across all revolving accounts and individual utilization for each credit card.
• Even if your total utilization is low, maxing out a single card can still hurt your score.

 

What Utilization Should You Aim For?

• Under 30% — This is the maximum utilization recommended to avoid significant score penalties.
• Under 10% — The ideal target range for those aiming for excellent credit scores (typically 750+).
• 0% isn’t necessary — A small balance reported to credit bureaus (1-9% utilization) can actually be better than $0, as it shows active, responsible use.

 

How Utilization Changes Affect Your Score

Credit utilization is a dynamic factor, meaning your score can change month-to-month as balances go up or down. Paying down credit cards before the statement closing date can result in immediate score improvements, since that’s when most issuers report balances to the credit bureaus.

Conversely, running up high balances — even temporarily — can cause sudden drops in your score, especially if your utilization jumps over 30%.

 

Tips to Lower Credit Utilization

🔹 Pay balances down aggressively.
Prioritize paying off cards with the highest utilization first.

🔹 Make multiple payments each month.
By paying before the statement closing date, you can lower the reported balance, reducing utilization on your credit report.

🔹 Request credit limit increases.
Higher limits can lower your utilization overnight — but only request increases if you’re confident you won’t overspend.

🔹 Spread balances across multiple cards.
If you must carry a balance, avoid maxing out a single card.

🔹 Avoid new large purchases on credit cards before applying for a major loan.
A sudden spike in utilization right before a mortgage or auto loan application can lower your score at the worst time.

🔹 Use personal loans strategically.
In some cases, consolidating credit card debt into a fixed-rate personal loan can reduce utilization, since installment loans don’t impact this factor. 

 

Because utilization is the second most influential part of your score, maintaining low balances relative to your limits is essential for building and protecting excellent credit. Unlike payment history, which requires time to improve, credit utilization is one area where you can see rapid score gains simply by paying down your balances or increasing your credit limits.

 

Length of Credit History (15% of Your Score)

The third factor in your credit score calculation — length of credit history — makes up 15% of your FICO score. This component measures how much experience you have managing credit over time and gives lenders insights into your financial maturity and consistency.

 

What Does Length of Credit History Measure?

Length of credit history isn’t a single metric — it’s actually calculated from several time-based elements on your credit report:

Age of your oldest account – The time since you opened your very first credit account. This shows how long you’ve been active in the credit system.

Average age of all your accounts – Calculated by adding up the ages of all your credit accounts (open and closed) and dividing by the total number of accounts. A higher average age signals that you have long-term credit experience.

Time since the last activity on each account – Frequent recent use of older accounts can keep your credit history looking fresh, while neglecting accounts for long periods can hurt your profile.

 

Why Is Length of Credit History Important?

Lenders prefer borrowers with longer credit histories because they provide more data to assess creditworthiness. A consumer with years of responsible credit behavior is considered a lower risk than someone new to credit, even if their recent activity looks good.

A short credit history can make it difficult to qualify for loans or credit cards with the best terms, since lenders have little information on how you handle debt over time. That’s why young adults, recent immigrants, or anyone who started building credit later in life often face challenges getting approved or receiving competitive rates.

 

What Hurts Length of Credit History?

Closing old accounts – When you close an old credit card, it will eventually drop off your credit report (typically 7-10 years later), which can significantly shorten your average account age.

Opening new accounts frequently – Each new account lowers your average age of credit history, especially if you don’t have many existing accounts.

Neglecting old accounts – Even if an old account is open, not using it for years could lead the creditor to close it due to inactivity, which then removes it from your active credit profile.

 

Tips to Optimize Length of Credit History

🔹 Keep your oldest accounts open whenever possible.
Even if you don’t use them regularly, these accounts contribute to both your oldest account age and average age.

🔹 Use old cards occasionally.
Make small purchases every few months on your oldest credit cards to keep them active and avoid closure due to inactivity.

🔹 Think twice before closing cards after paying them off.
There are valid reasons to close a card (e.g., high annual fees, temptation to overspend), but weigh the impact on your credit history first.

🔹 Be patient.
Unlike utilization or new credit inquiries, there’s no quick fix for building a long credit history — time is the only solution.

🔹 Consider being added as an authorized user.
If a family member or partner has a long-standing, responsibly managed credit card account, being added as an authorized user can sometimes add the account’s age to your credit report (depending on the scoring model).

 

A long, well-managed credit history shows lenders that you’re experienced with credit and capable of maintaining good financial habits over time. By keeping your oldest accounts open, avoiding unnecessary new credit applications, and using your credit responsibly, you can steadily improve this important component of your score and build a stronger financial foundation for the future.

 

Credit Mix (10% of Your Score)

The fourth factor in your credit score — credit mix — makes up 10% of your FICO score. While it carries less weight than payment history or utilization, it’s still a significant indicator of how well you can manage different types of debt.

What Is Credit Mix?

Credit mix refers to the variety of credit accounts listed on your credit report. The two primary categories of credit are:

Revolving credit – Accounts where your balance can change month-to-month up to a set limit, like credit cards or home equity lines of credit (HELOCs). These require ongoing management to avoid high balances and late payments.

Installment credit – Loans with fixed payments over a set period, such as mortgages, auto loans, personal loans, or student loans. Once you borrow the principal, you pay it back in equal installments until it’s fully repaid.

A “healthy mix” means having both revolving and installment accounts, which shows lenders you can handle different repayment structures responsibly.

 

Why Does Credit Mix Matter?

Credit scoring models reward consumers who successfully manage multiple types of credit, as it demonstrates a deeper level of financial experience. For example:

• A consumer who pays a credit card bill on time every month and makes steady car payments shows more diverse credit management than someone who only uses one type of account.

• Lenders believe if you can juggle different credit obligations — revolving balances with flexible payments and installment loans with fixed schedules — you’re less likely to default when faced with new credit challenges.

A limited credit profile with only one account type can make you appear riskier to lenders, even if you’re managing that one account perfectly.

 

Examples of Credit Accounts in a Healthy Mix

🔹 Revolving Accounts

• Credit cards (Visa, Mastercard, store cards)

• Home equity lines of credit (HELOCs)

🔹 Installment Accounts

• Mortgages

• Auto loans

• Student loans

• Personal loans

• Furniture or appliance financing

Misconceptions About Credit Mix

You don’t need every type of credit.
Some people think they must get every type of loan to build a good credit mix. That’s not true. Just having at least one revolving account and one installment account can often satisfy this factor.

Opening new accounts just for mix can backfire.
If you apply for new loans or credit cards solely to diversify your mix, you could trigger unnecessary hard inquiries, lower your average account age, and take on debt you don’t need — which can hurt your score more than it helps.

 

How to Improve Your Credit Mix

🔹 Consider your long-term needs.
Instead of opening accounts for the sake of variety, think about future goals like buying a car or home, which will naturally add installment loans to your credit mix.

🔹 Keep existing accounts in good standing.
Maintaining active, well-managed revolving accounts and installment loans demonstrates consistent responsibility.

🔹 If you have only one type of credit, consider adding the other when it aligns with your goals.
For example, if you only have installment loans like student loans, opening a low-limit credit card (and using it responsibly) can add revolving credit to your profile.

🔹 Avoid unnecessary debt.
A healthy mix doesn’t mean taking on loans you don’t need — it’s about responsibly managing the right types of credit that fit your lifestyle.

 

Credit mix only accounts for 10% of your credit score, but it can be the factor that tips you from a “good” to “excellent” score when the other components are solid. By maintaining both revolving and installment accounts — and managing them wisely — you signal to lenders that you’re experienced with different types of debt, which can improve your chances of approval and better rates in the future.

 

New Credit (10% of Your Score)

The fifth and final factor in your credit score — new credit — accounts for 10% of your FICO score. This component evaluates your recent activity related to opening new credit accounts, which helps lenders determine whether you’re taking on too much new debt at once.

What Is Considered “New Credit”?

New credit activity is primarily measured by:

Number of hard inquiries – When you apply for new credit (credit cards, auto loans, mortgages, etc.), the lender performs a “hard inquiry” or “hard pull” on your credit report to assess your risk. Each hard inquiry is recorded and can temporarily lower your score by a few points.

Recently opened accounts – New accounts lower your average account age (which can affect your length of credit history) and signal that you may be increasing your total debt obligations.

Frequency of credit applications – Applying for several new credit accounts in a short time frame raises red flags for lenders, suggesting you might be experiencing financial trouble or overextending yourself.

How Much Do Hard Inquiries Impact Your Score?

• Each hard inquiry typically reduces your score by 2 to 5 points, though the exact impact depends on your existing credit profile.

• The effect of inquiries diminishes quickly — they usually stop affecting your score after 6-12 months and fall off your credit report entirely after 24 months.

• Multiple inquiries for the same type of loan (e.g., mortgage or auto loan) within a short window (usually 14-45 days) are often treated as a single inquiry for scoring purposes, allowing you to shop for rates without major penalties.

Why Lenders Watch New Credit Activity

Frequent new applications can signal desperation for credit, financial instability, or impulsive spending — all red flags for lenders. A pattern of opening many accounts in a short period increases perceived risk and may lead creditors to decline new applications or offer higher interest rates.

Conversely, responsible, occasional new credit activity (like applying for a mortgage when buying a home) is perfectly normal and expected.

 

Tips to Manage New Credit Wisely

🔹 Apply for new credit sparingly.
Only open new accounts when you truly need them or when they align with your financial goals (e.g., purchasing a car or buying a home).

🔹 Space out applications.
If you need multiple new accounts, avoid opening them all within a short time frame. Spacing them out by several months can minimize score impacts and avoid alarming lenders.

🔹 Avoid unnecessary store credit cards.
While tempting for discounts, retail cards often have high interest rates, low limits, and can lower your average account age if opened frequently.

🔹 Monitor your inquiries.
Check your credit report regularly to ensure inquiries listed are legitimate. Unauthorized inquiries can sometimes result from fraud.

🔹 Plan ahead for major purchases.
In the 6-12 months before applying for a major loan (like a mortgage), minimize other credit applications to keep your score as high as possible.

 

What’s the Difference Between Hard and Soft Inquiries?

Hard inquiries impact your credit score and occur when you apply for new credit.
Soft inquiries don’t affect your score and include checks like:

• Pre-approved credit card offers

• Personal credit checks through services like Credit Karma or Got Credit Monitoring

• Employment background checks

Knowing the difference helps you avoid unnecessary hard pulls.

 

While new credit only contributes 10% to your overall score, managing it wisely can mean the difference between approval and denial — or a low vs. high interest rate — especially during major financial milestones. By limiting unnecessary applications, timing credit requests strategically, and understanding how inquiries affect your profile, you can protect this final piece of your credit score puzzle and set yourself up for long-term success.

 

Why Understanding These Factors Matters

Understanding the five key factors that determine your credit score isn’t just about knowing the rules — it’s about empowering yourself to take control of your financial life. Each factor tells a story about how you handle debt, manage obligations, and plan for the future. When you know what affects your score, you can make smarter choices that protect your creditworthiness and set you up for success.

Here’s why this knowledge is so powerful:

You’ll avoid costly mistakes. Knowing, for example, that closing an old credit card can shorten your credit history or that maxing out a single credit card can spike your utilization allows you to sidestep simple missteps that might otherwise drop your score by dozens of points.

You can strategically improve your credit. By identifying the areas where your profile is weakest — like high utilization or limited credit mix — you can create a clear plan of action to raise your score faster.

You’ll gain leverage with lenders. Higher scores don’t just increase your approval odds; they also give you negotiating power for lower interest rates, higher credit limits, and better loan terms — potentially saving you thousands of dollars over your lifetime.

You’ll be prepared for life’s milestones. Whether it’s buying your first home, financing a car, starting a business, or even renting an apartment, a strong credit profile makes these major financial goals more attainable and less stressful.

You’ll build long-term financial confidence. Understanding what drives your credit score gives you peace of mind, knowing you’re in control — not left guessing what’s happening behind the scenes.

By focusing on improving each of the five factors — payment history, amounts owed, length of credit history, credit mix, and new credit — you’ll not only raise your credit score but also unlock doors to better financial opportunities, greater stability, and the kind of financial freedom that lets you live life on your own terms.

 

Conclusion: Take Charge of Your Credit Today

Mastering your credit score begins with a clear understanding of the five critical factors that shape it — payment history, amounts owed, length of credit history, credit mix, and new credit. These components don’t just influence a three-digit number; they determine the financial opportunities you can access, from lower interest rates to higher credit limits and better loan terms.

Taking control of your credit means taking control of your financial future. By actively working to strengthen each factor, you can unlock the doors to buying your dream home, financing a car at the best rates, qualifying for premium credit cards, or simply having the peace of mind that comes with financial security.

If you’re ready to take your credit to the next level with expert support, proven strategies, and personalized guidance every step of the way, Sign Up with Got Credit? today. Together, we’ll help you build a stronger credit profile, achieve your goals, and create the financial freedom you deserve

  

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