What Affects Your Credit Score?

Experts agree that paying your bills on time has the greatest effect on your credit score.⁴ FICO says payment history accounts for 35% of your FICO score.² VantageScore, which does not disclose percentages, describes payment history as “extremely influential” in its scoring system.³

If you do have to pay late, it likely won’t affect your credit score until it’s more than 30 days past the due date.⁵ Experts say that one late payment can have a negative impact, but it may diminish with time and good payment behavior on all of your accounts.⁵ My experience with the MyCredit Guide credit score simulator demonstrated this. One late payment had little effect, but making late payments to all my creditors dropped my score a whopping 19%.
 
Experts also caution that the later your payment gets, the greater the negative impact.⁶ Payments that are 60 or 90 days late will likely hurt your score more than those that are 30 days late.⁶ Again, the MyCredit Guide simulator proved the point. Letting all my accounts fall 90 days behind cost me almost a quarter of my score and dropped me two ranges. For more on how lenders interpret the scoring ranges, read “Credit Score Ranges: What is an Excellent, Good, or Poor Credit Score?”
 
Experts also say that serious payment issues – such as charge-offs, collections, foreclosures, tax liens, or bankruptcy – can damage your credit score.⁷ These may remain visible on your credit report for as long as a decade.⁸ In the MyCredit Guide simulator, a single account going to collections decreased my score by 6%.

The next greatest effect on your FICO credit score is the amount of credit you use as a portion of how much is available to you, known as your credit utilization rate.⁹ FICO says it counts for 30% of your FICO^® Score.⁹ VantageScore calls it “highly influential,” and gives it the second greatest weight of all factors in its scoring model.³ Experts say that when your utilization exceeds 30% it hurts your score.³

FICO says that credit history counts for 15% of your FICO score,¹⁰ and VantageScore describes it as “highly influential.”³ Two things influence this portion of your score: the age of your oldest account and the average age of your combined accounts.^3,10 Lenders value history, so experts caution that opening new accounts can work against you because it lowers the average age of your accounts.¹¹

Experts also caution against looking at these elements in isolation.² For example, opening a new credit card account may have an initial negative impact on the credit history portion of your score. But experts say this may be offset by an improvement in the utilization rate component of your score, because the total amount of credit available to you increases when you open the new account.¹¹

Lenders want to see that you can effectively manage different kinds of debt, which is why FICO says your credit mix accounts for 10% of your score, and VantageScore labels it “highly influential.”^3,13 Experts say that having a portfolio that includes only credit cards or only installment loans (such as an auto loan or mortgage) has a small but negative impact.¹³

Each time a lender “pulls” your credit report for the purpose of making a lending decision, it’s known as a hard inquiry.¹⁴ Pulling a report to review it yourself, or if a lender pulls it to pre-approve you for an offer, is considered a soft inquiry.¹⁴ Each hard inquiry results in a ding on your credit and stays on your report for as long as two years.¹⁴ So, given the way it might reduce your credit score, experts advise against applying for credit too often in a short period of time.¹⁴ But there is a notable exception to this rule. Experts note that scoring models allow for the reality that consumers want to shop for the best option when seeking a major loan.¹⁴ Therefore, multiple inquiries for auto loans, student loans, or mortgages made within a 14- to 45-day window, depending on the loan and scoring model, may count as a single inquiry.¹⁴