What Has the Biggest Impact on Your Credit Score?

Your credit score plays a vital role in your financial life. It impacts everything from loan interest rates to rental applications and even employment decisions.

What Has the Biggest Impact on Your Credit Score?

So, what exactly has the biggest influence on this all-important three-digit number? Keep reading to find out.

Your Credit Score

Your credit score is calculated based on the information in your credit reports from the three major credit bureaus – Experian, TransUnion, and Equifax. While the exact formula used by each bureau varies slightly, five main factors impact your score the most:

  • Payment history – Whether you pay your bills on time. This has the single biggest impact, accounting for 35% of your score.
  • Credit utilization – The ratio between your total balances and total available credit limits. This accounts for 30% of your score.
  • Credit age – The average length of time your accounts have been open. This makes up 15% of your score.
  • Credit mix – The variety of credit types you have, such as credit cards, installment loans, mortgages, etc. This is 10% of your score.
  • New credit – How much new credit you have applied for recently? This is the last 10% of your score.

Below, we will explore each of these key factors in more detail. Understanding what influences your credit score is the first step to improving it over time.

Payment History

Your payment history has the biggest impact on your credit score, accounting for 35% of the calculation. This factor looks at your track record of making monthly debt payments on time.

On-Time Payments

When you make all your payments on time, every time, you demonstrate to lenders that you are a low-risk and reliable borrower. This will boost your credit score significantly over time. Most credit scoring models only look at your payment history from the last 12-24 months.

Late Payments

If you miss payments, become delinquent, or have debts referred to collection agencies, this can drastically drag down your credit score. A single 30-60-90-day late payment can drop your score by anywhere from 60-110 points. The more recent and severe the late payment, the bigger the impact.

Payment History Tips

  • Automate payments so you never miss payment due dates.
  • At least pay the minimum due every month.
  • If you may pay late, contact lenders before missing the payment to see if arrangements can be made.
  • Dispute any errors in your payment history report.
  • Allow time for negative information to fall off your reports (typically 7 years).

Credit Utilization

Your credit utilization ratio looks at how much of your total available credit you are using at any given time. Maintaining a low credit utilization has a very positive impact on your score. Credit utilization is 30% of your overall credit calculation.

Amounts Owed

This portion of your score looks at your total credit balances versus your total credit limits on revolving credit accounts like credit cards. The lower your balances are compared to your limits, the better.

Ideal Utilization

Most credit experts recommend keeping your utilization below 30%. Depending on your overall credit profile, staying under 10% can provide an even greater score boost. Zero utilization may not be ideal, as lenders like to see responsible usage.

Utilization Tips

  • Pay balances in full each month to avoid carrying debt.
  • Ask for higher limits on old credit cards to lower utilization.
  • Open a new card if needed to access more total limits.
  • Move debt to installment loans not factored into utilization.

Credit Age

The average age of your credit accounts is 15% of your credit score. In general, the longer your credit history, the better your score. This demonstrates you have a proven track record of managing credit responsibly over time.

Age of Accounts

Credit scoring models usually look at the age of your oldest account, newest account, and the average across all your accounts. Having long-standing credit in good standing boosts your score.

Closing Old Accounts

It may be tempting to close old credit cards you do not use anymore. However, closing your oldest accounts can hurt your credit age and score. Keep unused cards open.

New Credit Applications

Each new credit application can lower the average age of your accounts, which may drop your score in the short term. Apply selectively for accounts you need.

Credit Age Tips

  • Be patient – let accounts age for optimal scores.
  • Hang onto established accounts even if not in use.
  • Minimize opening too many new accounts close together.
  • Maintain a solid history with your oldest accounts.

Credit Mix

The credit mix represents 10% of your credit score calculation. This refers to having an ideal variety of different account types in good standing, such as mortgages, credit cards, student loans, and auto loans.

Mix of Accounts

Lenders like to see you have successfully managed different types of credit, not just a bunch of credit cards. This mix demonstrates you can handle all types of accounts responsibly.

Installment Loans

Adding installment loans – those with fixed regular payments and terms, such as auto loans, mortgages, and student loans – can boost your mix. These show you can make regular payments towards paying off balances, not just monthly credit card bills.

Too Many Accounts

While varied credit is good, opening too many accounts short term can lower your average age of accounts. Apply selectively for accounts to optimize your overall age and mix.

Credit Mix Tips

  • No need to take loans out you do not need them just to boost your credit mix.
  • Balance different types of new accounts and pay all as agreed.
  • Closing unused cards can impact age, so leave accounts open.
  • Having 5-7 well-managed accounts ideal for most profiles.

New Credit

The final 10% of your credit score gauges your pace of applying for and opening new credit accounts. Applying for too much new credit short-term signals higher risk and may lower your scores.

Hard Inquiries

Whenever you apply for new credit, the lender conducts a hard inquiry into your credit report. Each of these inquiries can modestly ding your scores for up to 12 months. Too many in a short period raises a red flag for lenders.

New Accounts

Opening too many new accounts nearly back-to-back can also signal higher risk and impact your scores. Have patience in allowing new accounts to age and build a positive history.

Rate Shopping

Seeking loan rates from multiple lenders counts as just one hard credit pull within a short window, minimizing the impact vs. multiple hard inquiries.

New Credit Tips

  • Avoid applying for multiple accounts in a short period.
  • Allow all new accounts to build highly positive histories over time.
  • Compare rates across multiple lenders within a focused period.
  • Let your credit reports fully refresh before applying for more new credit.


In summary, payment history, credit utilization, and the average age of your accounts have the biggest influence on your credit score.

Maintaining optimal standing across these critical factors while also demonstrating a healthy mix of account types over time is the recipe for credit scoring success. Monitor these areas, and practice responsible habits, and your score is sure to benefit.

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