What Affects Your Credit Scores?

Your credit score isn’t random. It’s calculated using five specific factors, each with a different weight. Payment history (35%) and credit utilization (30%) make up nearly two-thirds of your score. The other three factors; credit history length (15%), credit mix (10%), and new credit (10%) matter, but won’t make or break your credit score.

Focus on paying bills on time and keeping credit card balances low. Those two habits will do more for your score than everything else combined!

Credit Score Breakdown: 5 Factors that Actually Matter

Here’s exactly how much each factor contributes to your FICO Score.

Factor 1: Payment History (35%)

This is the big one.

Payment history accounts for more than a third of your credit score. One late payment can drop your score 50-100 points, depending on how strong it was before the miss.

So what actually counts as a late payment?

Here’s what most people don’t know: a payment isn’t reported as “late” to crest bureaus until it’s 30 days past due. Miss your payment by 5 days? You’ll probably pay a late fee, but it won’t hit your credit report. If you miss it by 31 days, that’s when the damage happens.

The Real Cost of Late Payments

How to Protect Your Payment History

1. Set up autopay for at least the minimum payment. Even if you plan to pay more later in the month, autopay ensures you never miss the deadline.
2. Use calendar alerts 3 days before due dates. This gives you time to transfer money if needed.
3. Call your creditor immediately if you’ll be late. Many will work with you but if you contact them before the 30-day mark.
4. Pay off collections account. They stay on your report for 7 years, but paying them shows you’re addressing old debts.

Factor 2: Credit Utilization (30%)

This is the percentage of your available credit you’re actually using. If you have $10,000 in total credit limits and you’re carrying $3,000 in balances, your utilization is 30%.

The 30% Rule (And Why It’s Not Enough)

Everyone says to keep utilization under 30%. That’s the minimum. People with scores above 800? They typically keep utilization under 10%.

Here’s how it impacts your credit score

Credit Utilization Impact Chart

The Timing Trick Most People Miss

Credit card companies report your balance to credit bureaus once a month, usually on your statement closing date, not your payment due date.

This means you can pay down your balance before your statement closes to show lower utilization, even if you haven’t paid your bill yet.

Example: Your statement closes on the 5th and payment is due on the 10th of next month. Pay down your balance on the 14th, and that lower balance gets reported. Ultimately, this improves your utilization instantly.

Quick Wins for Credit Utilization:

1. Request credit limit increases - more available credit = lower utilization (as long as you don’t spend more)
2. Pay down high-balance cards first - card-by-card utilization matters as much as total utilization
3. Make multiple payments per month - Instead of one payment, make 2-3 smaller payments to keep your running balance low.
4. Don' t close paid-off cards - closing a card reduces your available credit, which increases utilization

Factor 3: Length of Credit History (15%)

This measures how long you’ve been using credit. The scoring model looks at three things: the age of your oldest account, the age of your newest account, and the average age of all your accounts.

Why You Shouldn't Close Old Credit Cards

When you close a credit card, you don't immediately lose that account's age from your credit history—closed accounts in good standing stay on your report for up to 10 years. But here's what you do lose:

1. Available credit (which increases your utilization ratio)
2. An active account contributing to your mix

If a card has no annual fee, keep it open. Use it for one small recurring charge (like a streaming service) and set up autopay. That keeps the account active without any effort.

What If You're New to Credit?

Building credit history takes time—there's no shortcut. But there are ways to speed it up:

1. Become an authorized user on someone else's credit card (ideally a parent or spouse with good credit). Their account age and payment history can help your score.
2. Get a secured credit card – You put down a deposit (usually $200-500) which becomes your credit limit. After 6-12 months of on-time payments, many issuers will upgrade you to a regular card and refund your deposit.
3. Consider a credit-builder loan – These small loans from credit unions are designed specifically to build credit history.

Factor 4: Credit Mix (10%)

Credit mix refers to the variety of credit types you have. There are two main categories:

1. Revolving credit: Credit cards, lines of credit (no fixed payment schedule)
2. Instalment credit: Auto loans, mortgages, student loans, personal loans (fixed payment schedule)

Now, this isn’t something to stress about. It’s only 10% of your score. Never take out a loan just to diversify your credit mix. That’s expensive and counterproductive. If you have a mortgage, car loan, and credit card, great. If not, focus on the factors that matter more.

Factor 5: New Credit Inquiries (10%)

Every time you apply for credit, whether it be a credit card, car loan, or mortgage, the lender runs a hard inquiry on the credit report. Too many hard inquiries in a short time signals financial distress.

Each hard inquiry typically drops your score by 2-5 points. One or two per year? Not a problem. However, five of six in three months? That’s a red flag.

How to minimise inquiry damage:

1. Use pre-qualification tools - these use soft inquiries (Which don’t affect your score) to show your approval odds before you apply.
2. Space out credit applications - Wait at least 3-6 months between credit card applications
3. Shop for big loans within a focused window - if you’re buying a car, do all your loan shopping within 14 days.

7 Things That DON’T Affect Your Credit Score

Just as important as knowing what hurts your score is knowing what doesn’t. Here are the common misconceptions:

1. Checking your own credit score - This is a soft inquiry. Check as often as you want.

2. Your income - Scoring models don’t see how much you make. A millionaire and minimum wager worker can have the same score.

3. Your age - this isn’t a scoring factor

4. Rent payments - unless you’re using a service like Rent Rerporters that reports to credit bureaus, rent doesn’t count

5. Utility bills - Paying your electric or water bill on time doesn’t help your score (but missing payments that go to collections will hurt it)

6. Bank account balances - Having 50$ or $50,000 in checking doesn’t affect credit

7. Debit card usage - Debits cards aren t credit, so they don’t build your score

FICO vs. VantageScore: Does it Matter?

Most people think they have “one” credit score. Actually, you have dozens. The two main scoring models are FICO Score and VantageScore. While they use similar factors, they weigh them differently.

Bottom line: Fico is what matters most since it’s used by 90% of lenders. But the habits that improve your FICO score will also improve your VantageScore, so focus on the fundamentals: pay on time and keep balances low.

How Long Does it Take to Fix Credit Damage?

This is the question everyone asks, and the answer is: it depends on what damaged your score.

The key insight: Negative items stay on your report for years, but their impact on your score decreases over time. A 2-year-old late payment hurts less than a recent one. Keep building positive payment history, and the old damage fades into the background.

Your 30-Day Credit Score Action Plan

Focus on what matters most. Here’s exactly what to do in the next month:

Week 1: Audit Your Credit

1. Get your free credit reports from AnnualCreditReports.com
2. Check for errors (wrong balances, accounts that aren’t yours, incorrect late payments)
3. Dispute any inaccuracies with the credit bureau

Week 2: Fix Your Payment Setup

1. Set up autopay for all credit accounts (at least minimum payments)
2. Add payment reminds to your calendar 3 days before each due date

Week 3: Lower Your Utilization

1. Calculate your current utilization on each card.
2. Pay down high-balance cards to get below 30% (ideally below 10%)
3. Request credit limit increases on cards in good standing

Week 4: Optimize Your Mix

1. Review old credit cards-keep them open if no annual fee ( but you should first contact the issuer to see if you can downgrade to a no-fee card )
2. Put one small recurring charge on each unused card and set up autopay
3. Avoid applying for new credit for at least 6 months

The Bottom Line

Your credit score isn’t magic. It’s basic math. Payment history utlization make up 65% of your score. Master those two factors, and everything else falls into place.

The habits that matter most:

1. Pay every bill on time, every month
2. Keep credit card balances below 10% of limits
3. Don’t close old credit cards
4. Space out credit applications (3-6months minimum)
5. Check your credit reports annually for errors

Do these consistently, and you’ll see improvements within 3-6 months. The scoring models reward good behavior over time. And remember, there are no shortcuts, you’re in control.