What Makes Up Your Credit Score?

What Makes Up Your Credit Score?

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A credit score is a number between 300 and 850 that indicates a consumer’s creditworthiness. The better your credit score, the more desirable you appear to prospective moneylenders.

Credit scores are calculated using five significant elements. Lenders use these ratings to estimate your likelihood of repaying your loan. As a result, those scores are typically the most important factor in determining if you qualify for a new line of credit. Since your credit score fluctuates as your financial portfolio evolves, knowing what variables affect it provides you the chance to enhance it over time. Let’s have a look at each variable.

1. How Outstanding Debts Affect Your Credit Score

The amount you owe on credit cards and loans accounts for 30% of your score. This is determined by the total amount you owe. Additionally, the number and type of accounts you have and the percentage of money you owe in relation to the amount of credit you have available are important factors.

High balances and credit card maxes will reduce your credit score. Lesser amounts might boost it if you pay them on time. New loans with minimal payment history may temporarily lower your credit score. However, loans that are nearing completion may raise it due to positive payment history.


Paying down your credit card debt may help both your bank account and your credit score. However, as long as you pay your substantial installment payments on time—such as student loans, auto loans, and mortgages—the balances on these accounts are unlikely to have a significant influence on your credit score.

2. Your Payment Record and Your Credit Score

Your remittance record contributes to 35% of your total score. This demonstrates whether you pay your bills on time. It also shows how many days over the stipulated deadline you remit, how frequently you skip remittances, and how recently the remittances have been delayed.

Payments that are more than 30 days overdue will normally be reported by your lender to the credit agencies. This will lower your credit score. Factors include the number of accounts with outstanding payments, how late you are on a remittance, and if you’ve updated the accounts. The bigger your percentage of timely repayments, the higher your score. Your credit score suffers every moment you skip a payment.

Other payment-related information may also lower your score in this category. Foreclosures, bankruptcies, repossessions, charge-offs, and collection accounts are all bad for your credit. Fortunately, credit ratings take time into consideration. If you avoid having a bad payment record in the future, the effect of previous credit errors will gradually diminish.

3. Credit Mix

Your account types contribute to 10% of your overall score. A wide range of account types may be beneficial to your credit score.

If you have no revolving accounts on your credit record, applying for a new credit card (and managing it effectively) might help you in the long term. Similarly, a credit builder loan may be useful if you have no repayment accounts on your record. However, owing to the expense, this isn’t always the greatest approach to develop your credit.

If the lender reports to the credit agencies, a credit builder loan offers the unique capacity to assist you to create a small savings fund while building a positive tradeline on your credit reports. When you complete your last payment, you will have access to the borrowed funds. You can also do a superior tradelines review to find a legitimate approach to raising your credit score.

4. Length of Credit History (15%)

The duration of credit history is the third most crucial area of data in regard to your credit score. When calculating your credit score, FICO does not take your age into consideration, but the age of your accounts. Some of the questions that the FICO scoring algorithms will ask about credit age include:

  • How long has each account been active?
  • What are the ages of the credit report’s oldest and newest accounts?
  • When was the last time each account was active?
  • What is the median age of all the accounts?

Accounts that are older or have an older average age may allow you to obtain extra points for your total credit score. When it comes to their credit history, many people just have to wait patiently for time to work its magic. If you have a loved one who has an aged, steady credit card account, you may be able to expedite the procedure.

If a friend or family member agrees to add you as an authorized user to an active credit card, the account may appear on your credit reports. Supposing the account is aged (with low credit use and no late payments), it may assist to extend your average age of credit and maybe raise your credit score to an excellent credit score.


5. New Credit

The last 10% is made up of recent credit activity. If you’ve lately created many accounts it may indicate possible financial difficulty and reduce your score. Credit scoring methods, on the other hand, are designed to understand that customers looking for credit aren’t inherently more dangerous.

A hard inquiry occurs when you submit applications for credit and a lender analyzes your credit reports. For 24 months, hard inquiries show on your credit record. Some hard queries might lower your FICO score for close to a year, while others can be overlooked.


Soft inquiries may also appear on your credit record, but only if you check it yourself. A soft inquiry occurs when you examine your personal credit or if a lender approaches you for a pre-approved loan offer. Soft inquiries have no effect on your credit score.

A scoring algorithm may question, in addition to analyzing inquiries on your report, the following:

  • What is the start date of the new accounts (if any exist)?
  • How many new accounts do you see on your credit report?

It’s important to apply for and open a new credit account only when you really need it. However, as long as you don’t go overboard, you shouldn’t be scared to use your good credit to take advantage of a tempting deal.

You might also be thinking of using your good credit to start a new business or expand your current one. These, too, are good reasons to use your good credit.


The most effective strategy for increasing your FICO score is to utilize credit cards and loans wisely and make timely repayments. The more responsibly your credit record demonstrates that you can manage credit, the more eager moneylenders will be to grant you loans at a discounted rate. You can and should examine your reports on a regular basis. When reviewing your reports, pay close attention to the data that is important to you, such as your credit usage and payment record. Remember that if you uncover errors in your findings, you can always challenge them.