How Credit Scores Actually Work (And What Moves the Needle)

Credit-score advice tends to arrive as an undifferentiated list of twenty tips, which is unhelpful because it gives you no sense of what actually matters. FICO publishes the broad weightings, so you can prioritise properly.

The five factors, by weight

FICO groups the data into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

The headline: the first two make up about two-thirds of your score. Get those right and the rest is fine-tuning.

Payment history — 35%

The biggest factor is simply whether you pay on time. A single payment 30 days late or more can do real damage, and the harm deepens the further behind you fall. Collections, bankruptcies and the like are more serious still and linger for years.

The practical takeaway is unglamorous: automate at least the minimum payment on everything, so a missed due date can never happen through forgetfulness.

Amounts owed — 30%

This is mostly your credit utilisation — the percentage of your available revolving credit you're using. A common rule of thumb is to keep it below 30%, and those with the highest scores tend to sit below 10%.

The part people don't realise: this is calculated on the balance reported to the bureau, which is often your statement balance — so you can pay in full every month and still show high utilisation if you charge a lot before the statement date. Paying down before the statement closes, not just before the due date, can lower reported utilisation.

The other three

Length of credit history (15%) rewards older accounts — which is why closing your oldest card can backfire. New credit (10%) means each application can cause a small, temporary dip. Credit mix (10%) modestly rewards handling different credit types.

What this means in practice

Pay on time, keep utilisation low, and don't close old accounts casually. That's most of the score, and everything else is marginal.

An important caveat

This describes the US FICO model. Other countries use entirely different systems — the UK has its own bureaus and scoring, and many countries assess creditworthiness in ways that don't resemble this at all. The principles of paying on time and not overextending travel; the specific percentages don't.

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References

• What's in my FICO Scores? — myFICO
• What Affects Your Credit Scores? — Experian
• FICO Score Meaning: How It Works and Why It Matters — NerdWallet

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This article is for general information only and is not financial advice. The factor weightings describe the US FICO model and are approximate; the actual importance varies by individual profile, and other scoring models and countries differ substantially. Verify current guidance at myFICO or your national credit bureau.