5 Factors That Impact Your Credit Score

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impact your credit score

A grade point average (GPA) is a way for teachers, parents, and even students to monitor how well students are performing in school. A credit score is similar in that it acts as a grade of sorts, though instead of your school studies, it reflects how well you pay back your debts, balances your credit, and make payments on time. 

Balancing the great credit score act can be quite confusing. Wouldn’t it be great to have a cheat sheet on what these institutions specifically look at to determine your score? Read on and learn 5 factors that impact your credit score.

How does credit affect your life

Credit scores affect your life more than you think. For starters, you will not have to pay as much interest on loans when you have a higher credit score. 

Plus, when you have a low credit score, you might not be able to get approved for loans in the first place, even when those loans would help you immensely. 

Learning what lowers credit scores will help you increase your score. Let’s take a look at what the credit score is made up of and which factors influence it. 

Payment history: 35% 

Lenders and credit card companies alike place a lot of emphasis on how timely your past debt payments have been. Your past behaviors are thought to be indicative of how likely you are to repay the money on time in the future. 

This doesn’t mean you can’t have a few late payments. Most of us do! But lenders view patterns of late payments or no payments at all as red flags. 

Your payment history involves all types of credit-related accounts that you may have, whether those are credit cards, retail charge cards, installment loans, or mortgage loans. Late payments are also relative in nature, so if you do have some on your record, your credit score will be impacted by how late those payments were. 

All things being equal, paying a week late is better than paying a month late. Similarly, a late payment of $40 is less consequential than a late payment of $400.

Amounts owed: 30%

Debt on your credit report isn’t bad for your score. The better question is, “How much debt do you have compared to your total available credit?” 

Your credit score will be lower if this percentage is high because it might worry lenders. High credit usage could make lenders think that you are overextending your resources and more likely to make late or missed payments.

That said, having some debt can be better than having none at all because creditors are looking for proof that you’ve been able to borrow money or extend credit and pay it back in a timely fashion. How can these institutions determine if you will be good at paying them back if you have never done it before?

Length of credit history: 15% 

Generally, the longer your credit history, the better off your credit score will be. Lenders and credit card companies alike are more inclined to extend credit to somebody who has a proven track record of using credit. 

Read about when you should start building your credit. Your credit score will be affected by how long your accounts have been open, including the age of your oldest account, the age of your newest account, and the average age of all accounts. 

Length of credit is something that a credit repair company cannot fix in a short amount of time. This is up to you.

New credit: 10% 

A small part of your score will be determined by the number of new accounts that you have recently opened. Potential creditors want to know how many accounts you’ve applied for recently and when you last opened your new account. 

A flurry of inquiries into starting new credit accounts, which are known as hard inquiries, could suggest that you have issues with cash flow. These are concerning because a cash flow problem could affect someone’s ability to pay off future debts.

When you apply for credit, a hard inquiry will likely be placed on your credit report and it then becomes part of your score. Specifically, inquiries remain on your credit report for two years, although your score only includes inquiries made in the last twelve months.

However, the only inquiries that affect your credit score are hard inquiries. There are also soft inquiries, which are excluded from your credit score. Soft inquiries are performed during background checks by potential employers or when you check your own credit score.

How does having different accounts affect my credit score?

This category accounts for 10% of your credit score. Your overall FICO score can be affected in many ways, including by the number of credit lines you have open and the types of credit you have on record, regardless of how much debt you owe. 

This usually won’t be a significant factor, but it could prove to be more important if you don’t have a lot of other information on which to base a score. However, this doesn’t mean you should open new accounts that you don’t intend to use. 

Having a mix of auto loans, credit cards, personal loans, and mortgage loans can help you increase your credit score. If you’re curious as to whether or not auto insurance impacts your credit, check out this article.

Improve your credit score the easy way! 

Do you want to improve your score and credit knowledge? MoneyLion has created the Credit Builder Plus program to help anyone and everyone increase their score, no matter their financial situation. 

Credit Builder membership

  • Get a Credit Builder loan 
  • Monitor credit
  • Track progress
  • Get 0% APR Instacash
  • Get more for your money
  • Earn cashback rewards 

Credit Builder loan

Apply for a loan of up to $1,000 without having to agree to a hard credit inquiry. You will be able to secure a competitive rate with your loan and receive a portion of the funds right away. 

The rest will be deposited into a Credit Reserve Account in your name. You’ll build your credit history by paying back the loan through monthly installments within a period of twelve months.

Do your homework

Learn the importance of credit scores and how yours will impact your life on a day-to-day basis. Increasing your score is easier once you understand the factors that make up your score. You can start this process today with the help of MoneyLion’s Credit Builder Plus program.


Does your income affect your credit score?

Your income does not appear on your credit report, so income cannot be considered when calculating your score.

Do utilities affect credit score?

Using a rent and utility reporting service like Experian Boost will report your payments to the major credit bureaus. However, falling delinquent on your bill could cause a negative impact on your credit score.

Is a 600 a good credit score?

According to Experian, a score of 600 is considered “fair”. Anything above 670 is “good”.

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