What Affects Your Credit Score [Factors, Tips & FAQ]


Whenever you apply for a home loan or credit card there is one vital factor that lending companies take into account – your credit score. Late payments, credit history, and accounts held all have an effect on your rating.

With a poor credit score:

  • you’re less likely to get a loan
  • it’s harder to get good interest rates on personal loans

Having a bad credit score isn’t the end of the world, however. Luckily there are methods you can apply to fix your credit score. It’s important that you understand what affects your credit score and how to take steps to improve it. Not to worry, we’ve got you covered.

In this guide, we’ll walk you through credit scoring rules and meaning, factors affecting your score, a guide on how to improve your credit score, FAQ, and more.

What Is a Credit Score?

A credit score is a three-digit number that reflects an individual’s credit report rating. There are many different ways in which your credit score can be calculated and this used to cause confusion amongst consumers and lenders. The FICO scoring system was designed to create an industry standard. FICO stands for the Fair Isaac Corporation scoring system. It was created in the 1990s to provide a straightforward and credible system.

Most corporations and financial institutions have turned away from the numerous different credit scoring systems and now only use FICO as the standard scoring system. Let’s take a closer look at the FICO scoring system and what affects your credit score.

Your FICO score is basically a reflection of how you pay off credit and debt. The better you are at paying on time, the higher your score. Only the biggest credit score factors are taken into account like payment history and credit history. Lenders, landlords, and financial institutions refer to your credit score to decide whether you are trustworthy enough to lend money to.

For the consumer, a good credit score gives you access to credit and cash injections when you need them.

How Is Your Credit Score Calculated? 

Even though different credit scoring models factor different things, we’re going to focus on the industry-standard credit score calculation done by FICO. Your score can be anywhere between 300-850. Here is a guide of what the different scoring brackets mean:

FICO Score Range Description Rating
Less than 580 Far below the national average, an individual with this score will be considered a risky consumer to lend to Poor
580-669 Below the national average and risk for big loans with good interest rates. However, there are personal loans for bad credit with higher APR rates available Fair
670-739 Average or close to average and eligible for lending approval Good
740-799 Above the national average and classified as a dependable and trustworthy borrower Very Good
800+ Well above the national average and is seen as an exceptional and credible borrower Exceptional

Credit score factors that are taken into account to place you within these ranges are:

  • The types of accounts you hold in your name
  • Payment history
  • Credit history length and account history
  • Available credit vs used credit
  • The number of accounts you have
  • Number of ‘hard inquiries’ by lenders

All of the above-mentioned are key factors that affect your credit score.

Most Common Factors That Affect Your Credit Score

To build better credit you have to be aware of all the determining influences and what they entail. Let’s take a closer look at the key factors affecting your score.

Payment History

If you’ve been paying all of your accounts on time, you will be building up good credit with financial institutions. Missing making a payment to your credit provider or loaning company is not good for your profile. The reason for this is because loaning companies want to be sure that you’ll pay them back and within the agreed-upon time frame.

Your payment history makes up 35% of your FICO score. So, keeping on track with your payments will ensure a better credit rating.

Credit History Length

The length you’ve held your account is responsible for 15% of your FICO score. What affects your credit score negatively is when your credit history length is shorter than a few years.

Businessmen and financial advisors recommend that students who graduate from high school should open a credit account as soon as they are of age. If they start making monthly payments into these credit accounts without utilizing the credit available or maxing out the card, it will benefit them in the future.

Credit scores tend to be higher with individuals who have had credit accounts for a long period of time. It’s important to remember, however, that it’s not enough just to have them, you also need but to maintain them and adhere to monthly payments.

Amounts Owed

Making debt to pay off debt is never a good indicator to financial institutions. If you owe a large amount and are using available credit to pay for living expenses, this is known as credit utilization. Credit utilization is one of the many credit score factors and accounts for 30% of your overall FICO score.

If you apply for another loan, but still owe large amounts to other financial institutions, you will be seen as a risk.

New Credit and Hard Inquiries

Applying for a personal loan when you have too many new credit cards is a red flag for financial institutions. Whenever you apply for a mortgage loan or a large personal loan, the loaning company will usually do a ‘hard inquiry’ on your credit score. When there are too many ‘hard inquiries’ and open accounts you will be seen as a risk to lend money to. This factor accounts for 10% of your credit score.

Credit Mix

To calculate how well you manage your different accounts, financial institutions will look at your credit mix. This includes the accounts you have in your portfolio that might consist of a student loan, credit card, clothing store accounts, car loans, and other credit products. 10% of how your credit score is calculated depends on how you manage your various credit accounts.

Types of Accounts

Accounts that impact credit scores are revolving credit and installment loan accounts. Your credit score keeps track of your payment history and debt. Installment accounts are usually either auto loans, mortgages, study loans, or even credit builder loans. Revolving credit accounts have a spending limit and monthly payments.


Other factors that affect your credit scores are unfortunate events like foreclosure, charge-off, repossession, or bankruptcy. Many loaning companies have policies stating that people with bankruptcy charges aren’t eligible for a loan. These defaults on accounts can hurt your FICO score greatly. Even if you once had an excellent credit score, any of the above circumstances can decrease your rating in a very short time.

Other factors affecting your score are:

  • Being too dependent on available credit and using more than 30% of it on a regular basis
  • Making payments late or completely missing them
  • Applying for too many different credit loans within a short time
  • Defaulting factors like repossession, foreclosure, bankruptcy, and charge-offs

Even though there are many factors that impact your credit score, there are some actions that don’t have a negative effect. Here is a list of factors that don’t affect your credit score:

  • Paying someone else’s utility bill, clothing bill, or loan
  • How much money do you have in your accounts
  • Being denied credit or a loan from a financial institution
  • Changes in income or income provider (i.e. employer)
  • Changing details on a debit card
  • Checking your own credit reports through credit bureaus

Tips on Improving Your Credit Score

Now that you know what affects your credit score, we can look at how you can improve your bad credit. A bad credit score is any rating under 669. Luckily, you don’t have to get stuck in this bracket. By being consistent and aware of how you manage your money, you can sometimes improve your score within a few months.

Here are our top tips:

Monitor Credit

There are many service providers available that can help you monitor your expenditures. By identifying your problem areas, you can adjust accordingly and learn to manage your accounts.

Make Payments on Time

Since payment history is one of the most influential credit score factors, it’s important that you stick to payment schedules.

Pay Outstanding Bills

The more time you take to settle your accounts, the worse it will be for your credit score. Invoices typically have 30, 60, 90, or 120-day past due to date indications. Settle your accounts before the due dates.

Limit Credit Card Expenses

Even if you have a high credit card limit, it’s best to try not to utilize the whole amount. Not only will you pay high-interest rates, but your credit utilization score won’t be good.

There are financial institutions that give loans to those with bad credit to help them pay off their debt and rebuild their credit scores. Another way you can rebuild your credit score is by hiring some of the most excellent credit repair companies. These organizations will attempt to remove inaccurate or outdated information from your credit report in exchange for payment.

It’s also a good idea to try to educate yourself on how to manage your money better. Consult a professional for help and advice to help you rebuild your credit if it is currently in the poor FICO score rating category. As long as you are aware of the main factors that affect credit scores, you’ll be able to avoid lowering your score.

In Conclusion

Credit score factors such as late payments, having too many credit card accounts, a track record of ‘hard inquiries’, and mismanagement of installment and revolving credit accounts can all have negative effects on your credit score.

Luckily, some companies offer guaranteed loan approvals for those with bad credit while helping you improve your overall FICO score. Consulting a credit repair company and becoming more aware of how the system of credit scoring calculations works will help you rebuild your credit.


What affects my credit score?

There are five main factors that affect your credit score: credit history length, credit mix, new credit and ‘hard inquiries’, payment history, and amounts owed.

What does not affect your credit score?

Factors that don’t have an effect on your FICO score are how much money you have in your account, any changes to your account, or who pays your salary.

What is the most important factor in your credit score?

35% of your FICO score is determined by your payment history. If you have a long history of missing or late payments, it will have a serious impact on your credit.

How quickly can your credit score go up?

If you apply the right methods for improving your credit score, you will normally see a change for the better within 1 to 2 months. Many individuals use credit restoration services, like the ones Credit Saint offers, to improve their scores.

What should you do if your credit score is poor?

In order for your credit score to return to a good FICO score rating, you should pay off all outstanding debts, not utilize more than 30% of the credit available, and ensure you make payments on time.

How can your actions impact your credit scores?

The only actions that count against your credit score have to do with managing your finances. What affects your credit score has nothing to do with how you act as a person. Even if you are a trustworthy individual in your everyday life, the only factors that financial institutions will take into account are how often and how diligently you make payments.


I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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