Your credit score is a three-digit number that helps indicate your financial standing. There are several factors as to what makes up a credit score. For each of the credit score models, these include:
VantageScore® 3.0 model:
- Payment history: 40%
- Depth of credit/history: 21%
- Credit utilization: 20%
- Balances/amounts owed: 11%
- Recent credit: 5%
- Available credit: 3%
FICO® score model:
- Payment history: 35%
- Depth of credit/history: 15%
- Balances/amounts owed: 30%
- Recent credit: 10%
- Credit mix: 10%
As you can see, the factors for each model are weighed slightly differently. However, in both models some of the most important factors are payment history and your credit utilization, which is the percentage of how much you use of your credit limits.
It’s important to care about your credit score and the factors that affect it because your score can play a significant role in your finances and life overall. It could affect your ability to get a loan, credit card, mortgage and more. When you enroll in Chase Credit Journey®, you can learn more about these factors and receive a personalized plan provided by Experian™ to help you achieve a higher credit score.
In this article, you will learn about:
- The top factors that affect your credit score
- Other factors you should know about
- Factors that don’t affect your credit score
The top factors that affect your credit score
Payment history and your credit utilization ratio are the two top factors that affect your credit score.
Payment history shows your ability to make payments consistently and on time. This factor is so heavily considered because lenders will want to know how reliable you are when it comes to paying back your debt. If you have a history of missing payments, you could see a drop in your credit score and potentially have higher annual percentage rates (APRs), when you apply for a loan or credit card.
Credit utilization is important, too. This percentage is the proportion of credit you use against the total amount available to you. The higher this percentage, the more it could negatively affect your credit score. The ideal percentage for your credit utilization is around 30% or lower. This shows lenders that you don’t need to use all the credit available to you, which may help you to be considered more favorable to lend to.
Other factors you should know about
Other factors can greatly affect your score, and you may not even realize them at first. For example, let’s say you maintain good credit because you make your payments on time. If you then start missing payments, or consistently forget to pay off balances, this can hurt your score and result in a derogatory remark, which is a negative item that appears on your credit report for up to seven years or more. If you have a derogatory remark, this can further hurt your score, which has probably dropped by the time the remark appears on the credit report.
Derogatory remarks are just one factor to keep in mind. On the other hand, there are positive factors — like consistent payment history, your ability to make your credit card balances on time and your credit utilization can all have good impacts to your credit score.
Others include but are not limited to:
- Your debt-to-income ratio
- Hard inquiries when you take out a new line of credit
- Being an authorized user on another person’s card
- Overall credit mix and credit history
Factors that don’t affect your credit score
There are some factors that used to contribute to your score that no longer do, such as some public records. Other factors that don’t affect your credit score include, but are not limited to:
- If you get married/divorced or change your name
- A decrease in salary/no longer working (unless this causes you to miss or not be able to make your payments)
- Making payments with a debit card (this is because you are not building up your payment history when it comes to paying back your loan/credit card)
- Soft inquires – you check your credit report out of your own curiosity
Payment history and credit utilization are weighed heavily when it comes to calculating your credit score. However, there are plenty of other factors that are important too. Even though they might not be considered as heavily, these factors — such as derogatory remarks, debt-to-income ratio and credit mix — can add up over time and have a major impact on your score. To learn more about the factors affecting your credit score, enroll in Credit Journey®.