5 Factors That Impact Your Credit Score


You probably already know that your credit score is the number lenders (and even employers) look at to determine your financial responsibility and credit eligibility. It impacts what interest rate you get on a loan, how much you are qualified to borrow and sometimes (depending on the employer) is used to determine whether you get employed or not.

"Your credit score can impact what interest rate you get on a loan, how much you are qualified to borrow and is sometimes used to determine whether you get employed or not."

Ever wondered how this score is calculated? Well here are 5 factors used in calculating your score and their level of impact.

5 Credit Score Factors You Should Know

1. Payment history

Your payment history is basically how well you have paid your bills over time. This includes late and skipped payments and it has the heaviest weighting on your overall credit score. Your payment history is also used to forecast how well you will pay your bills in the future.

Credit score impact: 35%

2. Credit utilization

Your credit utilization is how much of your available credit you have used (your debt to credit ratio). If you are close to your credit limits then your credit utilization is high and if you are applying for new credit, to lenders, it might seem you are financially unstable since you are spending a lot of money on credit which is essentially money you don't have.

Ideally, your credit utilization should be no more than 30% of your available credit (10 - 20% is even better) if you want to maintain a good credit score in combination with other factors.

Credit score impact: 30%

3. Length of history

This factor shows how long each of your accounts has been open and when you last had any activity on your account. Ever heard that you should keep accounts open even if you don't actively use them? Well, a longer credit history provides more information about your financial behavior which makes lenders more comfortable with lending you money.

Credit score impact: 15%

4. New credit

This includes how many credit accounts you have opened recently as well how many recent inquiries have been made on your credit report. Too many new accounts and inquiries could suggest you are in financial trouble and desperately need access to money so be careful how many accounts you open all at once and do a proper assessment of what you need the accounts for.

Credit score impact: 10%

5. Types of credit

These are the different types of credit accounts you have. For instance credit cards, mortgage, auto loan, and student loans. Having a mix might imply that you can handle various types of credit. Lenders might also what to know how much "good debt"(e.g a mortgage) vs "bad debt" (e.g. credit cards) you have to determine your level of financial responsibility. Keep in mind though, that regardless of how your debt is categorized (good or bad), it is still money you owe.

Credit score impact: 10%


If you want to maintain or build your credit, keep these factors in mind. Most importantly be sure to never miss your bill payments, avoid paying late and plan to pay your balance in full each month. Also, focus on keeping your credit utilization low to avoid impacting your debt to credit ratio.