What affects my credit score?

Your credit score looks simple on the surface; it’s just a 3-digit number between 350 and 800. Behind your credit score, however, is a sophisticated formula that takes into consideration several factors that help banks determine your creditworthiness before approving you for a loan or credit card.

Here are the aspects of your financial life and habits that affect your credit score:

• 35%: Payment history is the biggest contributing factor, accounting for over a third of your credit score). Late and missed payments, foreclosures, and bankruptcies are all reflected here.
• 30%: Your credit utilization, which measures your available credit against the credit you’ve used, is just about as important. You want to keep the amount you owe far below the amount you’re allowed for a lower credit utilization ratio.
• 15%: The types of accounts (known as “tradelines”) that you have make up part of your credit score. These include installment loans (like a car payment or mortgage), revolving accounts, and “open accounts,” where you pay a fixed amount each month. Ideally you’ll have a healthy mix, as it speaks to how responsible you are with a variety of credit types.
• 10-12%: The number of applications you submit for new credit accounts also affects your credit score. The effect depends how many new credit accounts you’ve applied for, versus the total number of tradelines on your credit report. Too many new applications, especially if a lot are submitted in a short amount of time, can pull down your score.
• 5-7%: The length of your credit history represents also affects your credit score. The longer you’ve shown good financial habits, the better.

Now that you know what goes into your credit score, you can make your own smart calculations about how you handle your finances. And be sure to check out the factors that don’t affect your credit score.