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Top 10 Factors That Affect Your Credit Score

Last updated 03/20/2024 by

Julie Bawden-Davis
If you’re ever on a game show and they ask you what your most important financial number is, make sure to answer, “my credit score.”
This 3-digit number is responsible for much of what happens in your financial life. It is your credit score that determines how high or low the interest rates you pay are and whether you qualify for credit in the first place. If you rent your home, your score can determine how much of a security deposit you pay, and the rate car insurance providers will give you.
Of course, it’s hard to work on getting your credit score as high as possible without the facts, so consider these 10 factors that affect your score.

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1. Payment History

According to FICO’s “What’s In Your Score,” your payment history determines a whopping 35 percent of your credit score. It makes perfect sense when you think about it. Would you loan someone with a poor payment history your money? Probably not, unless the person is a really persuasive relative or a good friend.
Payment history includes a wide variety of account types, including major credit cards, retail accounts, installment loans and mortgage loans.
If you pay your bills on time and never miss payments, you will score high on payment history. On the other hand, if you have late and missing payments or worse, charge-offs, which indicate that debt collectors gave up on you paying your loans, your payment history score is likely to be low.

2. Amount of Debt You Owe

Thirty percent of your credit score is determined by the amount you currently owe, and if you’re carrying large amounts of debt. How much is too much? Lenders have formulas (read: debt to income ratio) to determine how much debt is too much for you.
If you owe a lot of money on several accounts, including being maxed out on some, this signals to lenders that you are at risk of default. Then again, if you owe small amounts on credit cards and have a substantial amount of unused credit (a low credit utilization rate), that will positively affect your credit score.
Some say that having a lot of unused credit could possibly be a risk. After all, what’s to say you won’t go on a shopping spree and load on the debt tomorrow? Again, there are a lot of things that factor into your score, but if you’re wondering, StackExchange has an excellent answer to this question. How bad is it to have a lot of credit available but not used?

3. Length of Credit History

Credit mastery is like any skill. The longer your credit history, the likelier it is you’re “good at” credit. Fifteen percent of your credit score is determined by the length of time you’ve had credit. This means that holding on to your first credit card, no matter how small the limit, is a good idea.
There’s a reason why some people have above-average credit. Here’s our blog post explaining how they’re handling credit differently.

4. Types of Credit

Ten percent of your credit score is based on the type of credit you have in use. FICO looks at the various accounts you have and determines if it is a well-balanced mix. Those with the highest scores don’t just have credit cards, but finance company accounts, mortgage loans and installment accounts, and so on.
In addition, creditors consider the number of accounts you have in use. A lot of accounts in use can have a negative impact on your score, whereas just a handful of credit cards used will likely increase your credit score. Do keep in mind that while you don’t want an overabundance of accounts in use at one time, it’s better to use part of the credit on several cards than to max out one card.

5. Many New Credit Accounts

A final 10 percent of your score is affected each time you take on more debt. While one new small account is unlikely to make much of a difference in your score, several new accounts in a short period of time will. New accounts generate inquiries, which are recorded on your credit report and are considered negatives.

6. Maxed Out Credit Cards

Not exactly the same as having a lot of debt, having a lot of maxed out credit cards shows that your credit utilization is high. Having a high percentage of your credit limit used up doesn’t show potential lenders that you’re good with credit, just that you’re good at having a lot of debt and not paying it off. The ideal “low” credit utilization is no more than 20% of your available credit across all accounts.

7. Accounts Sent to Collections

If a debt you owe is sent to a third-party debt collector in order to attempt to collect payment from you (and it’s on your credit report) your credit score will plummet. It is much better for your credit score to settle debt before it is sent to collections.
If the debt remains unpaid even after it’s sent to collections and the court gets involved and a judgment is made, this will sink your credit score even more. Paid judgments are less harmful to your credit than unpaid ones.

8. Loan Defaults

Like a credit card charge-off, a loan default shows that you did not meet your financial obligations, which indicates that you are a credit risk. Lenders don’t like taking risks!

9. Home Foreclosure

Falling behind in your mortgage payments and then foreclosing is especially damaging. And good luck getting approved for another mortgage in the future.

10. Bankruptcy

Of all factors that affect your credit score, bankruptcy is the most damaging. Not only is it one of the most negative things that can happen to an individual, bankruptcy sticks to your credit report for 7-10 years. This makes any potential credit move you want to make during that time difficult, if not impossible. Considering the far-reaching, negative consequences of this financial solution, it makes sense to seek alternatives whenever possible, such as debt settlement or personal loans from friends and family.
Use these factors to keep your credit score in tip-top shape. And keep in mind that various credit grantors employ their own sometimes seemingly mysterious methods and standards for determining your credit score, which means it’s likely to vary from lender to lender.
Don’t have your credit score, or a recent credit report? Check out or Credit Reporting companies reviews page for your best options.

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Julie Bawden-Davis

Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.

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