How to Understand the 5 Factors That Move Your Credit Score

Learn exactly what drives your credit score and how these five key habits influence your borrowing power over time.

1. Prioritize on-time payments. Payment history accounts for 35% of your score, making it the most significant factor. Even one payment that is 30 days late can drop a score by dozens of points. Set up automatic minimum payments to ensure you never miss a due date.
2. Manage your credit utilization. Utilization, or the percentage of your total available credit you are using, makes up 30% of your score. A common benchmark is to keep your balance below 30% of your total credit limit. Lower is better, and 10% or less is often considered optimal by scoring models.
3. Maintain the age of your accounts. The length of your credit history accounts for 15% of your score. This considers both the age of your oldest account and the average age of all your accounts. Keep your oldest accounts open even if you do not use them, as closing them can shorten your history.
4. Diversify your credit mix. Having a mix of revolving credit, such as credit cards, and installment loans, such as student or auto loans, makes up 10% of your score. Lenders like to see that you can manage different types of debt responsibly. Do not open new accounts solely for this purpose, but understand that variety helps over time.
5. Limit new credit applications. New credit inquiries account for the final 10% of your score. Every time you apply for credit, it creates a 'hard inquiry' that can briefly lower your score. Avoid opening several new accounts in a short window unless you are shopping for a single loan, like a mortgage, where inquiries are often grouped.