Your credit score is a three-digit number that lenders use to judge how likely you are to repay a debt. It affects whether you are approved for a loan or credit card, what interest rate you pay, and sometimes whether you can rent an apartment or get certain jobs. Understanding exactly how the score is calculated — and what moves it up or down — makes it possible to improve it deliberately rather than hoping it rises on its own.
The Five Factors That Determine Your Score
FICO scores — used by the majority of lenders — are calculated from five categories of information in your credit report. Each category is weighted differently. Knowing the weights helps you prioritize which actions will move the number most.
Payment History — 35%
The single largest factor. Every on-time payment strengthens your score; every missed or late payment damages it. A payment is typically reported late when it is 30 or more days past due. A single 30-day late payment can drop a good score by 50 to 100 points. The impact fades over time — a late payment from five years ago matters much less than one from last year — but negative marks can stay on your report for seven years. Paying on time, every time, is the highest-leverage habit in credit management.
Credit Utilization — 30%
Utilization is the percentage of your available revolving credit that you are using. If you have a $5,000 credit limit and a $1,500 balance, your utilization is 30%. Lower is better — most scoring experts recommend staying below 30%, with under 10% producing the best scores. Utilization is recalculated each month when your statement closes. Paying down balances before the statement date — not just before the due date — can improve your score quickly. Utilization only applies to revolving credit (credit cards, lines of credit), not installment loans.
Length of Credit History — 15%
Longer credit histories produce better scores, all else being equal. This factor considers the age of your oldest account, the age of your newest account, and the average age of all your accounts. Closing an old credit card reduces your average account age and can lower your score — which is why keeping old accounts open, even if unused, generally helps. Opening many new accounts in a short period lowers the average age of your accounts and can temporarily suppress your score.
Credit Mix — 10%
Lenders like to see that you can manage different types of credit responsibly. Credit mix considers whether you have a combination of revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, mortgages, personal loans, student loans). You do not need to take on debt just to improve your mix — this factor carries relatively little weight. But if you only have credit cards and no installment history, adding one can modestly improve your score over time.
New Credit — 10%
Each time you apply for new credit, the lender typically runs a hard inquiry on your credit report. Hard inquiries reduce your score slightly — usually 5 points or less — and remain on your report for two years, though their impact fades after about 12 months. Multiple applications for the same type of loan (auto, mortgage) within a short window — typically 14 to 45 days depending on the scoring model — are usually counted as a single inquiry, because shopping for the best rate on one loan is not treated the same as opening many accounts.
Score Ranges and What They Mean
FICO scores range from 300 to 850. Scores below 580 are considered poor and make credit approval difficult or expensive. Scores from 580 to 669 are fair. Good scores fall between 670 and 739. Scores from 740 to 799 are very good. Scores of 800 and above are exceptional and qualify for the best rates available. The specific cutoffs lenders use vary, but crossing from fair to good — getting above 670 — typically opens access to a significantly wider range of credit products at lower rates.
Who This Page Is For
- Anyone who has been denied credit or received a high interest rate and wants to understand why
- People who want to improve their score and are not sure which actions will have the most impact
- Those preparing to apply for a mortgage, car loan, or apartment and wanting to know where they stand
- Anyone who has heard conflicting advice about closing cards, carrying balances, or opening new accounts
- People starting to build credit for the first time or rebuilding after past financial difficulties
What to Do Next
- Check your credit scores — you can get free scores from many credit card issuers, or use AnnualCreditReport.com for your full credit reports
- Review your credit report for errors — incorrect late payments, accounts that are not yours, or balances that are wrong; dispute any errors with the credit bureau
- If your utilization is above 30%, focus on paying down card balances — this is the fastest way to improve a score
- Make sure every bill is paid on time going forward — even one 30-day late payment causes significant damage
- Read the Rebuilding Credit page if your score is below 670 and you want a step-by-step path to improvement
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