Why Your Score Matters
Your credit score (300–850) determines whether lenders approve you for credit and at what interest rate. A 100-point difference can mean thousands of dollars more in interest over a mortgage's life. It also affects apartment applications, some employers, and insurance premiums in certain states.
The 5 Factors
1. Payment History — 35%
The biggest factor by far. One 30-day late payment can drop your score significantly. Set up autopay for at least the minimum on every account, every month.
2. Credit Utilization — 30%
The percentage of available revolving credit you're using. If your combined card limits are $10,000 and you carry $3,000, utilization is 30%. Keep it below 30% — below 10% is ideal for top scores.
3. Length of Credit History — 15%
How long your accounts have been open. Don't close old credit cards, even rarely used ones — they're supporting your average account age.
4. Credit Mix — 10%
Having a variety of account types (credit cards, auto loan, mortgage) helps slightly. Don't open accounts just for mix — it's the smallest factor.
5. New Inquiries — 10%
Each credit application triggers a hard inquiry that can drop your score a few points temporarily. Rate-shopping for a single mortgage or auto loan within a 14–45 day window counts as one inquiry.
The 80/20 rule: Payment history and utilization make up 65% of your score. Master those two and you'll have an excellent score.
How to Improve Your Score
- Pay every bill on time, every month — automate it
- Pay down card balances below 30% utilization (10% is ideal)
- Don't close old accounts
- Only apply for new credit when you need it
- Dispute errors at AnnualCreditReport.com
Quick win: Paying down a high-utilization card is often the fastest improvement — sometimes visible within one billing cycle.
Common Myths
- Checking your own score hurts it. False — it's a soft inquiry with no effect.
- You need to carry a balance to build credit. False — paying in full builds credit equally well and saves you interest.
- Closing unused cards improves your score. Usually the opposite — it reduces available credit and shortens history.
Check for Free
You're entitled to one free report per year from each bureau at AnnualCreditReport.com. Many banks and credit cards also show your FICO score free within your account dashboard. Check regularly — errors are more common than most people expect.