Categories

Score Advice

What Affects Your Credit Scores?

Do you feel like you need an advanced degree to figure out what is affecting your credit score? Good news is you don't—it can actually be rather simple.

Behind the number itself (credit scores typically range from 300 to 850), there are five main factors used to calculate credit scores. Lenders use those scores to figure out how likely you are to pay back your debt—thus those scores are often the deciding factor in whether you will get a new loan.

As your financial profile changes, so does your score, so knowing what factors and types of accounts affect your credit score give you the opportunity to improve it over time.

Top 5 Credit Score Factors

While the exact criteria used by each scoring model varies, here are the most common factors that affect your credit scores.

  1. Payment history. Payment history is the most important ingredient in credit scoring, and even one missed payment can have a negative impact on your score. Lenders want to be sure that you will pay back your debt, and on time, when they are considering you for new credit. Payment history accounts for 35% of your FICO® Score*, the credit score used by most lenders.
  2. Credit utilization. Your credit utilization ratio is calculated by dividing the total revolving credit you are currently using by the total of all your revolving credit limits. This ratio looks at how much of your available credit you're utilizing and can give a snapshot of how reliant you are on non-cash funds. Using more than 30% of your available credit is a negative to creditors. Credit utilization accounts for 30% of your FICO® Score.
  3. Credit mix. People with top credit scores often carry a diverse portfolio of credit accounts. Credit scoring models consider the types of accounts and how many of each you have. Lenders use this credit mix to understand past debt experiences and how you have handled them.
  4. Hard inquiries. Hard inquiries are recorded in your credit file each time a lender requests your credit report as part of their decision-making process. Hard inquiries remain in your credit file for up to two years and can in some cases have a negative impact on your credit scores.
  5. Negative information. Late or missed payments, foreclosures, collection accounts, and charge-offs are all examples of negative information that can appear in your credit file. These typically indicate that you have defaulted on a loan in the past and can be red flags for lenders looking to approve you for new credit. The effect negative information has on your credit score depends on your overall credit profile and what type of record it is. These records typically stay in your file for at least seven years, so it's best to avoid any negative infraction if at all possible.

Types of Accounts That Impact Credit Scores

Typically, credit files contain information about two types of debt: installment loans and revolving credit. Because revolving and installment accounts keep a record of your debt and payment history, they are important for calculating your credit scores.

  • Installment credit usually comprises loans where you borrow a fixed amount and agree to make a monthly payment toward the overall balance until the loan is paid off. Student loans, personal loans, and mortgages are examples of installment accounts.
  • Revolving credit is typically associated with credit cards but can also include some types of home equity loans. With revolving credit accounts, you have a credit limit and make at least minimum monthly payments according to how much credit you use. Revolving credit can fluctuate and doesn't typically have a fixed term.

How Does Having Different Accounts Affect My Credit Score?

Credit mix—or the diversity of your credit accounts—is one of the most common factors used to calculate your credit scores. It is also one of the most overlooked by consumers. Maintaining different types of credit accounts, such as a mortgage, personal loan and credit card, shows lenders you can manage different types of debt at the same time. It also helps them get a clearer image of your finances and ability to pay back debt.

While having a less diverse credit portfolio won't necessarily cause your scores to go down, the more types of credit you have—as long as you make on-time payments—the better. Credit mix accounts for 10% of your FICO® Score and could be an influential factor in helping you achieve a top score.

Can Service Accounts Impact My Credit Score?

Service accounts, such as utility and phone bills, are not automatically included in your credit file. Historically, the only way a utility account could impact a credit score was if you didn't make payments and the account was referred to a collection agency.

But this is changing. A revolutionary new product called Experian Boost now allows users to get credit for on-time payments made on utility and telecom accounts.

Experian Boost works instantly, allowing users with eligible payment history see their FICO® Score increase in a matter of minutes. Currently, it is the only way you can get credit for your utility and telecom payments.

Through the new platform, users can connect their bank accounts to identify utility and phone bills. After the user verifies the data and confirms they want it added to their credit file, they will receive an updated FICO® Score instantly. Late utility and telecom payments do not affect your Boost score—but remember, if your account goes to collections due to nonpayment, that will stay on your credit report for seven years.

What Can Hurt Your Credit Scores

As we discussed above, certain core features of your credit file have a great impact on your credit score, either positively or negatively. The following common actions can hurt your credit score:

  • Missing payments. Payment history is one of the most important aspects of your FICO® Score, and even one 30-day late payment or missed payment can have a negative impact.
  • Using too much available credit. High credit utilization can be a red flag to creditors that you're too dependent on credit. Credit utilization is calculated by dividing the total amount of revolving credit you are currently using by the total of all your credit limits. Lenders like to see credit utilization under 30%—under 10% is even better. This ratio accounts for 30% of your FICO® Score.
  • Applying for a lot of credit in a short time. Each time a lender requests your credit reports for a lending decision, a hard inquiry is recorded in your credit file. These inquiries stay in your file for two years and can cause your score to go down slightly for a period of time. Lenders look at the number of hard inquiries to gauge how much new credit you are requesting. Too many inquiries in a short period of time can signal that you are in a dire financial situation or you are being denied new credit.
  • Defaulting on accounts. The types of negative account information that can show up on your credit report include foreclosure, bankruptcy, repossession, charge-offs, settled accounts. Each of these can severely hurt your credit for years, even up to a decade.

How to Improve Your Credit Score

Improving your credit score can be easy once you understand why your score is struggling. It may take time and effort, but developing responsible habits now can help you grow your score in the long run.

A good first step is to get a free copy of your credit report and score so you can understand what is in your credit file. Next, focus on what is bringing your score down and work toward improving these areas.

Here are some common steps you can take to increase your credit score.

  1. Pay your bills on time. Because payment history is the most important factor in making up your credit score, paying all your bills on time every month is critical to improving your credit.
  2. Pay down debt. Reducing your credit card balances is a great way to lower your credit utilization ratio, and can be one of the quickest ways to see a credit score boost.
  3. Make any outstanding payments. If you have any payments that are past due, bringing them up to date may save your credit score from taking an even bigger hit. Late payment information in credit files include how late the payment was—30, 60 or 90 days past due—and the more time that has elapsed, the larger the impact on your scores.
  4. Dispute inaccurate information on your report. Mistakes happen, and your scores could suffer because of inaccurate information in your credit file. Periodically monitor your credit reports to make sure no inaccurate information appears. If you find something that's out of place, initiate a dispute as soon as possible.
  5. Limit new credit requests. Limiting the number of times you ask for new credit will reduce the number of hard inquiries in your credit file. Hard inquiries stay on your credit report for two years, though their impact on your scores fades over time.

What to Do if You Don't Have a Credit Score

If you want to establish and build your credit but don't have a credit score, these options will help you get going.

  • Get a secured credit card. A secured credit card can be used the same way as a conventional credit card. The only difference is that a security deposit—typically equal to your credit limit—is required when signing up for a secured card. This security deposit helps protect the credit issuer if you default and makes them more comfortable taking on riskier borrowers. Use the secured card to make small essential purchases and be sure to pay your bill in full and on time each month to help establish and build your credit. Click here to learn more about how secured cards work and here to browse Experian's secured card partners.
  • Become an authorized user. If you are close with someone who has a credit card, you could ask them to add you as an authorized user to jump-start your credit. In this scenario, you get your own card and are given spending privileges on the main cardholder's account. In many cases, credit card issuers report authorized users to the credit bureaus, which adds to your credit file. As long as the primary cardholder makes all their payments on time, you should benefit.

Want to instantly increase your credit score? Experian Boost helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.

This service is completely free and can boost your credit score fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.

*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.

†Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score
Resources
Sign up for helpful tips, special offers and more!
You're signed up!
Our system is undergoing maintenance and will be available again soon.