What Factors Influence Your Credit Score?

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A question we get all the time about credit scores is what influences them, i.e., exactly what actions have what effect on your credit score? This has been a mystery and will probably remain a mystery for quite some time. There are journalists who have been able to extract some information from FICO, but exact numbers and calculations will be a forever highly guarded secret. Below you will see a chart roughly summarizing the effects of certain actions on a person with an excellent credit score and then a person with an average credit score.


If your score is 680 If your score is 780
Maxed-Out Card  down 10 to 30 points  down 25 to 45 points
30-day Late Payment  down 60 to 80 points  down 90 to 110 points
Debt Settlement  down 45 to 65 points  down 105 to 125 points
Foreclosure  down 85 to 105 points  down 140 to 160 points
Bankruptcy  down 130 to 150 points  down 220 to 240 points

Besides giving out how much your score will drop, there is still not much we know about how the starting score is calculated. Your FICO Score, which is used by the majority of all lending institutions, was developed by Fair Isaac. This scoring model did not start out to be the industry standard but has since become an integral part of the credit granting process. The FICO scoring model took years to develop and Fair Isaac has all kinds of empirical data to back up the accuracy of their model. The lending industry, which finds comfort in numbers, gets a warm and fuzzy feeling of fairness by using this model: since almost everyone uses it so it gives the impression that everyone being measured by the same yardstick.

Factors That Influence Your Credit Score

Your credit score is based on information taken from your credit report. According to Experian, there are about 30 individual factors used to determine your credit score. Some factors have more weight than others and one factor may be more important to you than another person based on the differences in each person’s credit report. Also, each factor can change as your credit report changes. Here are the five categories used when determining your credit score:

  1. Payment History — Payment information on credit cards, installment loans (such as a car loan), mortgage loans, or finance company accounts. Details on late or missed payments, including how much was owed, how late the payments were, and how recently they occurred. How many accounts show no late payments. According to Fair Isaac, this category usually determines about 35 percent of your score.
  2. Outstanding Debt — Amount owed on all accounts and on different types of accounts, such as credit cards or installment loans. How many accounts have balances? How close are you to each credit limit? According to Fair Isaac, this category usually determines about 30 percent of your score.
  3. Credit History — How long have you been building a credit history? How long specific accounts have been established and how long since you used each account? According to Fair Isaac, this category usually determines about 15 percent of your score.
  4. Pursuit of New Credit — How many inquiries and new accounts does your report show, and how recent are they? How long has it been since the most recent inquiry? Whether you have made on-time payments to re-build your credit after a period of frequent late payments. According to Fair Isaac, this category usually determines about 10 percent of your score.
  5. Type of Credit in Use — How many accounts are reported for bank cards, travel and entertainment cards, department store cards, installment loans, and so on. According to Fair Isaac, this category usually determines about 10 percent of your score.

Also informative is the list of reasons that may be provided to account for why a score isn’t higher. When lenders request your credit score, they also receive a list of the four most significant reasons your score is not higher – they should share the reasons listed on the report with you. Possible FICO reasons are:

  • Amount owed on accounts is too high.
  • Delinquency on accounts.
  • Too few bank revolving accounts.
  • Too many bank or national revolving accounts.
  • Too many accounts with balances.
  • Consumer finance accounts.
  • Account payment history too new to rate.
  • Too many recent inquiries in the last 12 months.
  • Too many accounts opened in the last 12 months.
  • Proportion of balances to credit limits is too high on revolving accounts.
  • Amount owed on revolving accounts is too high.
  • Length of revolving credit history is too short.
  • Time since delinquency is too recent or unknown.
  • Length of credit history is too short.
  • Lack of recent bank revolving information.
  • Lack of recent revolving account information.
  • No recent non-mortgage balance information.
  • Number of accounts with delinquency.
  • Too few accounts currently paid as agreed.
  • Time since derogatory public record or collection.
  • Amount past due on accounts.
  • Serious delinquency, derogatory public record, or collection.
  • Too many bank or national revolving accounts with balances.
  • No recent revolving balances.
  • Proportion of loan balances to loan amounts is too high.
  • Lack of recent installment loan information.
  • Date of last inquiry too recent.
  • Time since most recent account opening too short.
  • Number of revolving accounts.
  • Number of bank revolving or other revolving accounts.
  • Number of established accounts.
  • No recent bankcard balances.
  • Too few accounts with recent payment information.

Keep in mind, many lenders use their own credit scoring models along with the FICO scoring model so you may get different scores from each model. Your score will also change over time and some creditors may not report to all the credit bureaus. So having said all of that, there is really no clear-cut answer as to what exactly influences your credit score and how much. There are general guidelines provided but no clear-cut numbers to quantify how much your score will increase/decrease with a certain action. Best advice, just work on cleaning up your credit and paying your bills on time.

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