Your Bill Payment History

Payment history determines 35% of your credit score. In fact, how timely you pay your bills affects your credit score more than any other factor. Serious payment issues, like charge-offs, collections, bankruptcy, repossession, tax liens, or foreclosure can devastate your credit score, making it almost impossible to get approved for anything that requires good credit.

The best thing you can do for your credit score is to make your payments on time each month.[1]

Your Level of Debt Matters

Your debt level determines 30% of your credit score. Credit scoring calculations, such as the FICO score, look at a few key factors related to your debt. The amount of overall debt you carry, the ratio of your credit card balances to your credit limit (also called credit utilization), and the relation of your loan balances to the original loan amount.

As a guideline, you should keep your credit card utilization at 30% or less, meaning only charge up to 30% of any card's available limit.

Having high balances or too much debt can heavily affect your credit score. The good news is that your credit score can improve quickly as you pay down your balances.[2]

Your Credit History Age

How old is your oldest credit account? The age of credit is 15% of your credit score and considers both the age of your oldest account and the average age of all your accounts. Having an "older" credit age is better for your credit score because it shows that you have a lot of experience handling credit. Opening new accounts or closing existing accounts can lower your average credit age. For that reason, it's typically not a good idea to open several new accounts at once.[3]

Types of Credit on Your Report

Two basic types of credit accounts exist, revolving accounts and installment loans. Having both types of accounts on your credit report is better for your credit score because it indicates you have experience managing various types of credit.

It's even better if you have loans for different types of assets, such as a car or a home, in addition to credit cards, and maybe a student or personal loan. However, the types of credit only constitute 10% of your credit score, so not having a certain type of credit, such as an installment loan, won't devastate your score.[4]

Number of Credit Inquiries

Each time you submit an application that requires a credit check, an inquiry is placed on your credit report showing that you've made a credit-based application. Inquiries make up 10% of your credit score. One or two inquiries won't hurt much, but several inquiries, especially within a short period of time can cost you many points off of your FICO score. Keep your applications to a minimum to preserve your credit score.

The good news is that only those inquiries made within the last 12 months factor into your credit score.[5] Inquiries completely disappear from your credit report after 24 months.[6]

Note that checking your own credit report results in a "soft" inquiry, which does not affect your credit score.[7]

Factors That Don't Affect Your Credit

Some factors are commonly thought to influence your credit score, but they don't—not directly at least. Information like income, bank balances, and employment status can influence your ability to get approved, but they don't actually factor into the algorithm that calculates your credit score. Age, marital status, and debit or prepaid card usage also do not influence your credit score.