The 5 Elements That Make Up A Credit Score

Your credit score is one of the most important numbers in your financial life. It determines whether you’ll be approved for loans, the interest rates you’ll pay, and even your ability to rent an apartment or secure certain jobs. But what exactly goes into your credit score? Understanding the five elements that make up your credit score can help you take control of your financial future. Here’s a breakdown of each component and its percentage of influence on your score.

1. Payment History (35%)

Your payment history is the single most significant factor in your credit score, accounting for 35% of the total. Lenders want to see that you’ve paid your bills on time in the past, as it’s the best indicator of whether you’ll do so in the future.

What impacts this element:

• Late payments
• Missed payments
• Accounts sent to collections
• Bankruptcies or foreclosures

How to improve: Always pay your bills on time. If you’ve missed payments in the past, focus on building a consistent on-time payment history moving forward.

2. Credit Utilization (30%)

Credit utilization—or the amount of credit you’re using compared to your total available credit—makes up 30% of your credit score. This is also known as your credit utilization ratio.

What impacts this element:

• High balances on credit cards
• Using too much of your available credit limit

How to improve: Keep your credit utilization below 30%, and aim for even lower if possible. For example, if you have a $10,000 credit limit, try to keep your balances under $3,000.

3. Length of Credit History (15%)

The length of your credit history accounts for 15% of your credit score. This factor considers how long your accounts have been open and the average age of your accounts.

What impacts this element:

• The age of your oldest account
• The age of your newest account
• The average age of all accounts

How to improve: Avoid closing old accounts, as they help increase the average age of your credit history. If you’re new to credit, be patient—your score will improve as your accounts age.

4. Credit Mix (10%)

Your credit mix refers to the different types of credit accounts you have, such as credit cards, auto loans, mortgages, and student loans. This factor makes up 10% of your credit score and shows lenders that you can handle different types of credit responsibly.

What impacts this element:

• Having both revolving credit (e.g., credit cards) and installment loans (e.g., car loans, mortgages)
• The variety of credit accounts in your report

How to improve: Diversify your credit accounts responsibly. Don’t open new accounts just for the sake of variety, but consider adding an installment loan if your credit profile is limited to revolving accounts (or vice versa).

5. New Credit (10%)

New credit—or the number of recent inquiries and new accounts—makes up 10% of your credit score. Opening too many accounts in a short period can signal risk to lenders.

What impacts this element:

• Hard inquiries from credit applications
• Opening multiple new accounts within a short timeframe

How to improve: Limit how often you apply for new credit. Only apply for new accounts when necessary, and try to space out your applications to minimize the impact on your score.

Final Thoughts

Understanding the five elements of your credit score—payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit (10%)—is the first step toward improving your credit. By focusing on these areas, you can build a strong credit profile and unlock financial opportunities.

Queen City Credit Clinic specialize in helping individuals understand and improve their credit scores. If you’re ready to take control of your credit, contact us today. We’re here to help you every step of the way!