What determines credit score?
The main factors that determine your credit score are payment history and accounts owed, followed by length of credit history, new credit and types of credit used. Most credit scoring systems use scores between 300 and 850, with a higher number indicating greater creditworthiness.
VantageScore and FICO credit scores are the ones most commonly used by lenders to determine how likely you are to make good on your debts. However, not all factors affect your credit in the same way:
Payment history: Payment history determines 35% of your FICO credit rating and is moderately influential on your VantageScore. Paying your bills on time has a positive effect. In contrast, accounts in collections, charge-offs, debt settlements and foreclosures lower your credit score. Most negative payment history entries affect your credit history for up to seven years, and bankruptcies stay on your report for even longer. Amounts owed: Amounts owed determines 30% of your FICO credit score. FICO and VantageScore scores factor in your credit utilization ratio to measure how well you manage debt relative to your available credit limit. Length of credit history: The length of your credit history determines 15% of your FICO credit score and is less influential to your VantageScore. Lenders like to see a long, healthy credit history, which is why your credit score goes down when you close a credit card account. New credit: New credit determines 10% of your FICO credit score. Applying for a new line of credit requires lenders to pull a hard inquiry on your credit information. If you apply for many lines of credit in a short time, it indicates to potential lenders that you could have cash flow problems. Types of credit used: Types of credit you use determine 10% of your FICO score. Creditors like to see applicants who have successfully managed diverse types of credit, including installment loans, mortgages and credit cards.
Credit scores are only determined by information found in your credit file. For example, your age, occupation, salary, marital status and receipt of public assistance do not affect your credit score. As of 2018, credit reports no longer include tax liens.