How Your Credit Score Is Calculated: Five Factors, Two That Drive It

Your credit score is a three-digit number between 300 and 850. Mortgage lenders, auto lenders, credit card issuers, and sometimes landlords use it to price what they charge you to borrow money.

FICO Score 8 is the version most lenders pull. It divides into five weighted categories.

The five factors

Payment history: 35%

On-time payments, across every account and every month, carry more weight than anything else in the model. One 30-day late mark can drop a strong score by 60 to 110 points, and it stays on your report for seven years.

Amounts owed (credit utilization): 30%

Utilization is what percentage of your available revolving credit you're currently carrying as a balance. A $3,000 balance on a $10,000 limit is 30%. On a card with a $4,000 limit, that same $3,000 balance is 75%. The score grades both the per-card rate and the portfolio-wide rate.

This factor moves faster than any other. Pay down a high-balance card and the change appears in the next billing cycle.

Length of credit history: 15%

Older accounts help. Your score weighs the age of your oldest account, your newest account, and the average age of all accounts combined. Closing an old, unused card reduces your average account age and removes its credit limit from your utilization math — two hits at once.

Credit mix: 10%

A portfolio with both revolving credit (credit cards) and installment debt (auto loans, student loans, mortgages) scores better than one type alone. The improvement from this slice is modest. Don't take on debt to improve it.

New credit: 10%

Each application for new credit triggers a hard inquiry that typically drops your score 5 to 10 points. The effect fades over 12 months, but the inquiry stays on your report for two years. Applying for multiple cards in a short window compounds this.

The utilization math

The score calculates utilization at both the card level and the portfolio level. A maxed-out card hurts even when your overall utilization is reasonable.

Say you have two cards:

• Card A: $8,000 limit, $5,600 balance (70% utilization)
• Card B: $4,000 limit, $400 balance (10% utilization)

Combined: $6,000 / $12,000 = 50%.

Paying Card A down to $800 changes both numbers:

• Card A: $800 / $8,000 = 10%
• Combined: $1,200 / $12,000 = 10%

Going from 50% to 10% combined, with Card A dropping from 70% to 10%, can move a FICO score by 40 to 100 points depending on where it starts. That range is wide because the model rewards lower utilization more steeply the closer you get to zero.

The threshold most lenders consider "good" is under 30% combined. Under 10% is better.

Two common mistakes

Closing old cards. When you close a card, its credit limit disappears from your utilization denominator. If you had a $6,000 card with a $0 balance and you close it, your available credit drops by $6,000, and any balances on remaining cards now eat a larger share of a smaller total limit. The card's age history also stops helping your account average. Leave unused cards open unless the annual fee is the problem.

Paying a collection expecting removal. Paying a collection account changes its status from "unpaid" to "paid collection" but doesn't remove the mark. It stays for seven years from the original delinquency date. Some newer scoring models, including FICO 9 and VantageScore 4, ignore paid collections entirely, but most mortgage lenders still use FICO 8 or older models that count them either way.

Building from scratch or rebuilding

A secured credit card is the standard starting point. You deposit a sum, the issuer gives you a credit line in that amount, and you use it like a normal card. After 6 to 12 months of on-time payments and low utilization, most issuers convert it to a standard card and return the deposit. Capital One Quicksilver Secured and Discover it Secured both skip the annual fee.

Being added as an authorized user to someone else's established card is the other option. Their account's age and on-time history appears on your report immediately. It helps most if their account is old, well-managed, and has a high limit.

Once the history is in place, using credit strategically to earn rewards is a separate skill. The mechanics of credit card rewards programs covers how they work without assuming you're already optimizing.

For informational purposes only. Not financial, tax, or legal advice.