How Your Credit Score Is Calculated, and 5 Moves That Help
Five factors set a FICO score. What each one weighs and what to do about it.
This article is educational information only, not personalized financial advice. Nusafa and its authors are not licensed financial advisors, and nothing here should be read as a recommendation to buy, sell, or hold any specific investment. Read our full disclosure policy.
Your credit score is a number you did not pick, built from five factors you can influence. Knowing how much each one counts tells you where your effort pays off.
Key takeaways
- FICO weights five factors: payment history 35%, amounts owed 30%, length of history 15%, new credit 10% and credit mix 10%.
- Paying on time and keeping balances low make up about two thirds of the score.
- Checking your own score does not lower it.
FICO is one scoring model. Other models, such as VantageScore, weigh things differently, and lenders may use different versions. The weights below are FICO's.
Five factors, five moves
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Payment history, 35%. Pay every bill on time. This is the biggest factor. Lenders generally report a payment as late once it is 30 days past due, but pay by the due date anyway, since fees and interest start sooner. Move: turn on autopay for at least the minimum on every account.
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Amounts owed, 30%. Keep balances low. FICO looks at your total balances, how many accounts carry a balance and how much of your available credit you use. A common rule of thumb is to stay under 30% of each card's limit, and lower is generally better. Many issuers report your balance around the statement date, so paying down before it closes can lower the number that gets reported. Move: divide each balance by its limit and pay down the highest percentage first.
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Length of history, 15%. Keep old accounts open. FICO considers the age of your oldest account, your newest account and the average. Closing a card also lowers your total available credit, which can push your usage percentage up. Move: do not close your oldest card just to tidy up, especially if it has no annual fee.
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New credit, 10%. Apply only when you need to. Several applications in a short time can hurt. The exception is rate shopping: FICO treats multiple inquiries for a mortgage, auto loan or student loan inside a short window as one. Older versions use 14 days and newer ones use 45, so gather every offer within about two weeks to be safe. That treatment is described for those loan types, so do not assume it covers credit card applications. Move: before any loan, decide on a two week window to compare lenders.
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Credit mix, 10%. Do not borrow for the mix. FICO looks at the blend of cards, retail accounts and loans. It is only 10%, and it is never a reason to take a loan you do not need. Move: leave it alone and put your effort into the first two factors.
Where to look first
You can get your credit reports from all three bureaus for free every week at AnnualCreditReport.com. Requesting your own reports or checking your own score is a soft inquiry and does not lower your score. Read them for accounts you do not recognize and dispute anything wrong.
For related reading, see debt payoff: avalanche or snowball and five questions to ask before buy now, pay later.
Your checklist for this week
- ☐ Turn on autopay for the minimum on every account.
- ☐ Write down each card's balance, limit and percentage used.
- ☐ Pull your free reports at AnnualCreditReport.com and look for errors.
- ☐ List your oldest accounts and decide not to close them.
- ☐ If you are shopping for a loan, collect every offer inside two weeks.
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This is general education, not personalized financial advice.
