The 4 Factors That Determine Your Credit Score

By now you know that paying your credit card debt will improve your credit score, but what else makes up your FICO score?

1. Payment History – 35% 

Payment history is the largest factor used in determining your credit score. This includes on-time payments, so if you’re trying to improve your score, whatever you do, don’t let a payment run late or be missed.

2. Length of Credit History – 15%

What this means is how long your accounts have been opened. Generally, a longer established credit history results in a better score, assuming the accounts are in good standing. FICO looks at the age of your newest account, oldest account, and the average age of all of your accounts combined.

3. Types of Credit – 10%

What types of credit do you have? A mortgage, student loans, credit card debt, medical bills, retail accounts…all of these are considered.

4. New Credit – 10%

You never want to open too many new accounts within a short amount of time. According to myfico.com, “Research shows that opening several credit accounts in a short period of time represents a greater risk – especially for people who don’t have a long credit history.”

The Road to Recovery: How to Boost Your Score

By boosting your score you’ll receive lower interest rates and increase your chances of approval for all types of loans and credit decisions.

Your credit report information is updated frequently, so when you begin making positive changes it won’t take very long to notice improvements if you’re consistent. Other than paying down your credit card debt, there are other actions you can take.

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The Consumer Federation of America suggests these four actions for improving your credit score:

  • Consistently pay bills on time every month.
  • Do not max out, or even coming close to maxing out, credit cards or other revolving credit accounts.
  • Pay down debt rather than just moving it around, as well as not opening many new accounts rapidly.
  • Regularly check credit reports to make sure they are error-free.