Level All Team
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May 15, 2025
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3 min
Your credit score is more than just a number – it’s a snapshot of your financial reliability. Whether you're planning to get a credit card, lease an apartment, or apply for a student loan, your credit score can shape your access to opportunities and the terms you receive. But what exactly goes into calculating this all-important number? In this guide, we’ll break down the five key factors that influence your credit score, explain why they matter, and show you how to build and protect a strong financial foundation.
The most important part of your credit score is whether you pay your bills on time. In fact, your payment history accounts for 35% of your score. Lenders want to know if you’re dependable, and a consistent track record of paying credit cards, loans, or even utility bills on time builds trust.
Missing payments, even just once, can hurt your score significantly. If a payment is more than 30 days late, your lender may report it to the credit bureaus, potentially dropping your score by 60 to 110 points. That hit compounds every additional month the payment is missed. The good news? Making on-time payments is within your control. Setting up automatic payments or calendar reminders can keep your history clean.
Your debt utilization ratio shows how much credit you're using compared to how much you have available. It makes up 30% of your score, making it the second-most impactful factor. A high utilization ratio can signal financial stress, while a lower ratio suggests responsible use of credit. A good rule of thumb: keep your usage under 30% of your total credit limit. So if you have a credit card with a $1,000 limit, try not to carry a balance higher than $300. Maxing out your credit cards – or even coming close – can lower your score, even if you pay on time.
How long you’ve had credit matters, too. The length of your credit history accounts for 15% of your score. This includes the age of your oldest and newest accounts, and the average age of all your accounts. Longer histories suggest stability, so opening and keeping older accounts in good standing helps.
Closing a credit card can shorten your average account age and negatively affect your score. If the card doesn’t have an annual fee, it might be better to keep it open and use it occasionally to maintain a positive history.
Lenders also like to see that you can handle different types of credit. Your credit mix, which is worth 10% of your score, refers to the variety of accounts you have. This might include credit cards (revolving credit), car or student loans (installment credit), or utility accounts (open credit).
You don’t need to rush out and apply for new types of credit just for variety’s sake. But if you’ve only ever had a credit card, responsibly managing an installment loan can enhance your profile. A healthy mix, used wisely, shows you're a well-rounded borrower.
The final 10% of your credit score comes from recent credit activity, including new accounts and credit checks. When you apply for a loan or credit card, the lender performs a “hard inquiry,” which can ding your score by about 5 points. Several hard inquiries in a short time frame can signal risk.
To minimize the impact, avoid opening multiple new accounts at once. If you're shopping for a mortgage or car loan, try to complete applications within a 14–45 day window—credit bureaus typically treat these as a single inquiry. You can also look for “soft pull” prequalification offers, which won’t affect your score.
