What makes up my credit score?

There are many factors that go into a credit score.  Understanding how they work may help you improve your score (or maintain a high one). 

 Your credit score (that magical number between 300 and 850) can make a big impact on your life. First, it can determine how easy or difficult it is for you to borrow money. The lower your credit score, the higher your interest rates on loans might be. The better your credit score, the less it will likely cost you to borrow money (keep in mind that other factors can influence the rate as well). But there are also other aspects of your life that may be affected by the quality of your credit score.  Landlords will sometimes check the credit score of potential tenants to help make a decision, and employers will often check the credit score of applicants during the hiring process. Raising your credit score can be a valuable financial goal.

There are many factors that can affect your credit score. One way to potentially improve your score is understanding which factors have the greatest impact, and what you can do about them. According to the credit rating service FICO®, the following five factors have the greatest effect on your score:

  1. Amounts Owed

The total amount owed on your accounts determines about 30 percent of your credit score. When a high percentage of your credit is being used, it could be interpreted that your finances are overextended and that you are more likely to make late or missed payments.

  1. Payment History

Your payment history makes up about 35 percent of your score. This is one of the most influential factors when determining a credit score. Lenders may want to know whether or not you’ve paid off past debts on time. Your credit-payment history is drawn from account types including credit cards, retail credit cards, mortgage loans, auto loans, bankruptcies, foreclosures and lawsuits. Factors such as how late the payments were, the amounts owed and how long ago the late payment was may also be considered.

  1. Credit Mix

Your credit mix, or your mix of credit cards, loans, mortgage loans and finance accounts, determines approximately 10 percent of your credit score. This takes into account the total number of accounts you have and what types of credit accounts you have. Keep in mind that closing an account won’t make it disappear, as the account and its history can still be considered when calculating your credit score.

  1. Length of Credit History

This takes into account how long your accounts have been established – including the age of your newest account, the age of your oldest account and an average age of all of your accounts. This makes up about 15 percent of your score.

  1. New Credit

This considers how frequently you open credit accounts in a short period of time. Lenders may consider you a greater risk if you often open multiple lines of credit over a short amount of time. Several other factors are considered when it comes to new credit, including the age of credit history and how you shop for credit. This makes up about 10 percent of your credit score.

How can I raise my credit score?

So now you know the five factors with the greatest influence on your credit score. What can you do to raise your score (or maintain a high one)? Consider the following tips, and remember that some tips might make more sense for your financial situation than others:Animated image of a debit card, car, home, and commercial building with overlaying text saying "What makes up my credit score?"

  • Pay your bills on time and in full each month.
  • Build a credit history as soon as you are able. Long credit histories can strengthen a credit score. The more lenders know about your credit habits the less risky you may appear.
  • Avoid spending more than 30 percent of your available credit at any given time.
  • Remember that while paying off your total credit card balance each month is a great habit, your score may still be affected if you are always spending high percentages of your limits.
  • Avoid opening unnecessary lines of credit.
  • Avoid applying for and opening multiple lines of credit together within a short amount of time. This includes things like auto loans, mortgage loans, student loans and credit cards.
  • Slowly diversify your lines of credit. Paying off different types of credit over time can positively impact your credit score.

Remember that it takes time to improve a credit score.  If you are unhappy with your current score, don’t expect a quick fix. Rather, consider practicing strong credit habits over time and exercising patience.

FICO® is a registered trademark of Fair Isaac Corporation.

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