Your credit score might feel confusing, but it’s made up of five simple pieces. Understanding these can help you take control of your financial future.
- Payment History (35%)
This is the biggest factor. It looks at whether you pay your bills on time. Most credit cards won’t submit a late payment unless you’re 30 days late so if you forget the due date, you have a little wiggle room to make it up. Even one late payment can hurt your score, so consistency matters most.
Pro tip: Set your loan payments to autopay so that you don’t miss your payment! - Credit Usage (30%)
This measures how much of your available credit you’re using. For example, if you have a $1,000 limit and owe $800, that’s high usage. Keeping balances low while having a higher available credit will get you a higher score here. This doesn’t apply to installment loans such as a mortgage or car loan.
Pro tip: Keeping your usage above 30% will hurt you so it’s best to stay below that. The gold standard is 10%! - Length of Credit History (15%)
The longer you’ve had credit, the better. This includes the age of your oldest account and the average age of all your accounts. That’s why it’s often helpful to keep older accounts open.
Pro tip: Take your oldest credit card and set it up to autopay one small bill. Then have that credit card on auto pay. It allows you to keep you oldest card open even if it’s not the primary card you want to use. - Credit Mix (10%)
This looks at the types of credit you have, like credit cards, car loans, or student loans. A mix can help your score, but it’s not necessary to take on debt just to improve it. - New Credit (10%)
Opening several new accounts in a short time can lower your score. Each application creates a “hard inquiry,” which may temporarily bring your score down. A ‘hard inquiry’ is when someone looks at your credit to determine if they should give you a loan. If you check your credit score via Credit Karma, Annual Credit Report or something similar, it’s considered a ‘soft inquiry’ and doesn’t impact your score.
