How Credit Scores Are Calculated: The Five Factors and What Actually Moves Them
Widely used credit scores weigh payment history, amounts owed, length of history, new credit, and credit mix. Here is what each factor means, roughly how much it counts, and which actions change your score fastest.
A credit score is a number that predicts how likely you are to repay debt on time, based on the information in your credit reports. Lenders, landlords, and in many states insurers use scores or credit-based information to make decisions. There are many scoring models, but the most widely used ones look at similar factors.
The short version
- FICO, a widely used scoring model, describes five factor categories with approximate weights: payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10%, and credit mix 10%.
- On-time payments and low balances relative to limits matter most.
- Scores are calculated from your credit reports, so errors on reports can lower scores.
- Your score can differ by bureau and by model version, because reports and formulas differ.
- Income, savings, and employment aren't part of the score itself.
The five factors
Show the numbers behind this chart
| Approximate weight | |
|---|---|
| Payment history | 35% |
| Amounts owed | 30% |
| Length of credit history | 15% |
| New credit | 10% |
| Credit mix | 10% |
1. Payment history (about 35%)
Whether you pay on time. Late payments, collections, and bankruptcies hurt, with more recent and more severe problems hurting more. Late payments are generally reported once they're 30 days past due. Negative items fade in impact over time and are generally removed after set periods; see how long negative items stay on a credit report.
2. Amounts owed (about 30%)
How much you owe, especially on revolving accounts like credit cards, relative to your limits. This is where credit utilization comes in; see credit utilization. Paying down card balances can improve scores relatively quickly.
3. Length of credit history (about 15%)
How long your accounts have been open, including your oldest account and the average age. Closing old accounts doesn't remove them from your report immediately, but it can eventually reduce average age and available credit.
4. New credit (about 10%)
Recently opened accounts and recent hard inquiries. Several new accounts in a short period can signal risk. Rate shopping for mortgages, auto loans, and student loans is generally treated as a single inquiry within a window; see hard vs. soft inquiries.
5. Credit mix (about 10%)
Experience with different types of credit, such as revolving (credit cards) and installment (car loans, mortgages). It's a minor factor; opening accounts just to improve mix usually isn't worth it.
What moves scores fastest
| Action | Typical effect timing |
|---|---|
| Paying down credit card balances | Can show up after the next balance is reported |
| Correcting an error on your report | After the dispute is resolved and reported |
| Avoiding new hard inquiries | Inquiry effects fade over months |
| Making every payment on time | Builds steadily over months and years |
| Letting negative items age | Impact declines over years |
Why you have more than one score
- Three bureaus: Equifax, Experian, and TransUnion may have slightly different information.
- Different models and versions: lenders use different scoring models; mortgage lenders often use older versions.
- Industry-specific scores: auto and credit card versions exist.
What isn't in your score
Income, employment, savings, age, race, religion, national origin, sex, and marital status aren't used in credit scores. Lenders may consider income and other factors separately in deciding whether to lend.
Credit and insurance
In many states, auto and home insurers use credit-based insurance scores, which are built from credit report data but designed to predict insurance claims rather than repayment. Some states restrict or prohibit this.
The takeaway
Credit scores are driven mainly by paying on time and keeping balances low relative to limits. Length of history, new credit, and credit mix matter less. Check your reports for errors, pay every bill on time, and keep revolving balances low; those habits drive most of the score.
Sources
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