Credit Score Factors: Revealing the Key Factors that Impact Your Scores

Whether you’re just starting with credit or trying to recover from a low credit score, understanding what affects your credit scores is important. Fortunately, the basics are pretty straightforward. And once you get these down, you’re well on your way to becoming a credit score pro. 

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What is a credit score?

Credit scores were created to give creditors a simple way to calculate the risk of extending credit to a borrower. (Perhaps that’s one of the reasons all the details tend to be hard for everyone else to understand.) 

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Specifically, credit scoring models predict the chance that someone will miss a payment by 90 or more days in the next 24 months. The results often range from 300 to 850, but a score doesn’t correspond to a chance of missing a payment. Instead, credit scores rank consumers. Those with higher scores are less likely to miss a payment, which is why a higher score is better. 

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Key factors influencing your credit scores

FICO and VantageScore develop credit scoring models, and creditors can choose which score—or scores—to use. 

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The factors that influence your credit scores can depend on the type of credit score. Additionally, credit scores use interdependent factors. Something that raises someone else’s score by 10 points might raise yours by 15 points—or five. 

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However, almost every credit score tries to predict the same thing using either your credit report from Equifax, Experian, or TransUnion. And while the specifics can vary, the most to least important credit score factors tend to stay the same. These are:

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Paying your bills on time

Your payment history can be the most important factor. Making on-time payments on loans, credit cards, and other accounts that are reported to the bureaus can help you build a positive payment history. Missing payments, having accounts sent to collections, and filing for bankruptcy can hurt your scores.

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Your outstanding debt

Your balances on credit accounts can also have a significant impact on your credit scores, including:

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• How much you owe overall. 
• How much you owe on individual accounts.
• The number of accounts you have with balances. 

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Your credit utilization ratio—the percentage of your credit limits you’re using on revolving credit accounts—is also a large part of this scoring factor. 

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How long you’ve used credit

The age of your accounts is a moderately important factor that includes:

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• The age of your oldest account.
• The age of your newest account.
• The average age of all your accounts.
  
  

Only the accounts that are in your credit reports count towards these calculations, but that can include opened and closed accounts. 

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Experience with different types of accounts

It’s a relatively minor factor, but your credit score might improve if you have open installment and revolving credit accounts. 

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Installment accounts are loans that you repay with regular payments, such as student, personal, auto, and mortgage loans. Revolving credit accounts, such as credit card accounts and lines of credit, don’t have a specific payment amount or repayment term. 

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Your recent credit activity

Having new accounts and hard inquiries—records of when someone checks your credit report for a lending purpose—can lower your credit scores. However, this is a relatively minor factor and often a necessary step back if you want to build credit. 

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How to max your points in each scoring factor

Getting a good credit score isn’t necessarily easy, but it’s not a mystery. If you’re trying to speed things up or improve your credit after missteps or misfortune, you can:

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Keep a close eye on your bills

You can’t change your payment history, but you can manage your bills going forward. Consider:

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• Setting up automatic payments on your credit cards.
• Keeping an eye out for missed payments. Creditors can’t report late payments to the credit bureaus unless you’re at least 30 days past due.
• Paying off or settling collections accounts. 

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If you’re having trouble affording your payments, you can also try reaching out to a nonprofit credit counseling agency. Credit counselors might be able to negotiate with your creditors and help you get on more affordable payment plans. 

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Lower your credit utilization

A low credit utilization ratio is best for your credit scores, and you can lower your utilization by:

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• Paying down credit card balances.
• Limiting how often you use your credit cards.
• Making credit card payments during your billing cycle.
• Asking for a higher credit limit or opening new credit cards. 

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Your credit utilization doesn't have a memory, and you might see a quick increase in your credit scores if you lower a high utilization rate. 

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Become an authorized user

You can’t magically increase the length of your credit history. However, when someone adds you as an authorized user on one of their credit cards, the card issuer might report the entire account’s history to the major credit bureaus under your name. If it does, the account’s age, credit limit, and payment history might help your credit scores.

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Diversify your credit mix

If you don’t have open installment and revolving accounts, consider opening a credit card or loan. Credit cards don’t have to cost you anything. And there are some low-cost loans for building credit, such as Ava’s Savings Builder, that help you build savings at the same time. 

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Limit how often you apply for new credit

Opening new accounts is often important for building credit, but be mindful in your approach. Only open accounts with a specific purpose, such as improving your credit or making a purchase. And see if you can check offers with a soft credit inquiry, which won’t hurt your credit scores. 

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Keep building and learning

Although the specifics can get complex, the basics of credit are fairly simple: open credit accounts, make your payments on time, and stick with it while your scores increase. If you want to do this without taking on lots of debt, Ava uses a soft inquiry to review your application for a Credit Builder Card or Savings Builder loan. 

‍Learn more about the inner workings of credit scores and make credit work for you.