Quick AnswerPayment history is the most important factor of your credit score, making up 35% of FICO® Scores.
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Your credit score may seem to be the product of a mysterious mathematical formula, but the factors that go into calculating your credit score are fairly straightforward. You may be aware that you have a credit score—and probably several scores—but do you know how your scores are calculated?
The most crucial component of your FICO%C2%AE%20Score%E2%98%89%20, which 90% of the best lenders use, is your payment history or how well you’ve handled your credit accounts. The amounts owed on your credit accounts, or more precisely, the percentage of your available credit that you are using, come in close second. The three other factors carry less weight. Heres what you need to know.
The Big Kahuna: Payment History Reigns Supreme
When it comes to your credit score, the single most important factor is your payment history. This behemoth accounts for a whopping 35% of your score, making it the undisputed king of the credit jungle.
What Bills Count?
Your payment history encompasses a wide range of bills, including:
- Credit cards: Mastercard, Visa, American Express, Discover, and store credit cards
- Installment loans: Auto loans, mortgages, and other loans with regular payments
- Finance company accounts: Loans and lines of credit from finance companies
- Utility bills: Phone, electricity, gas, water, and internet bills (through Experian Boost®)
Late Payments: The Credit Score Kryptonite
Late payments can linger on your credit report for up to seven years, wreaking havoc on your score. The severity of the damage depends on how late the payment was:
- 30 days late: A late fee, but no credit score impact.
- 30+ days late: Your credit score takes a hit, the severity depending on how long the payment remains delinquent.
Boost Your Payment History: Tame the Credit Beast
Observe these guidelines to enhance your payment history and possibly raise your score:
- Pay all bills on time: This is the holy grail of credit score improvement.
- Catch up on past-due payments: Bringing delinquent accounts current helps your score over time.
- Activate automatic bill payments: Autopilot payments reduce the risk of missed deadlines.
- Set payment reminders: Get timely alerts for upcoming due dates.
Other Credit Score Factors: The Supporting Cast
While payment history is the main attraction, there are other important factors as well:
- Amounts owed (30%): The amount of revolving credit you’re using (credit utilization ratio) and your total debt impact your score. Aim for a utilization ratio below 10%.
- Length of credit history (15%): A longer credit history generally leads to a higher score.
- Mix of credit types (10%): Managing different types of credit, like credit cards, mortgages, and personal loans, can help your score.
- New credit (10%): Opening several new accounts in a short period can signal risky behavior and lower your score.
The Bottom Line: Payment History is King
Regularly making on-time bill payments will help you build a solid credit score. Make sure your payment history and other credit-related factors are in excellent shape by routinely checking your free Experian credit score and reviewing your free Experian credit report.
Bonus Tip: Experian Boost® to the Rescue
Experian Boost® can help improve your credit score by considering your on-time payments for utility and phone bills. It’s a free and easy way to potentially give your score a boost.
Remember: A good credit score opens doors to better interest rates, lower insurance premiums, and more financial opportunities. Take control of your credit health today!
Payment History Is the Most Important Factor of Your Credit Score
Payment history accounts for 35% of your FICO® Score. Four other factors that go into your credit score calculation make up the remaining 65%.
Recall that there are up to 28 different iterations of the FICO® Score. This implies that you might have a score for a credit card application, a separate score for a mortgage application, and a third score for an auto loan application. When calculating these various scores, FICO weighs your payment history on your credit accounts most.
Why is payment history more important than the other factors? A lender wants to protect itself from risk. Therefore, it wants to know whether youve made timely payments on current and previous credit accounts. According to FICO, research shows payment history is typically the No. 1 predictor of whether youll pay your debts on time, thus the heavier emphasis on this factor.
How to Improve Your Payment History
The easiest advice is to always pay your bills on time and make sure you have budgeted enough money to cover them if you want to improve your payment history and possibly raise your credit score. Other recommendations include:
- Catch up on past-due payments. Bringing unpaid bills current will help your score over time.
- Activate automatic bill payments. By setting up automatic payments, you can lower the likelihood that a bill will go unpaid.
- Set up payment alerts. You can set up reminders with many creditors to let you know when payments are due.
The Big Problem With Credit Scores
FAQ
What is the biggest impact on credit score?
What factors affect your credit score?
Other factors, such as payment history and credit utilization, can have a significant impact. However, as you continue to build your credit history, it’s important to be patient and consistent in your credit management practices. In summary, the length of your credit history is an important factor in determining your credit score.
What is the most important factor of your credit score?
The most important factor of your credit score is **payment history**, which accounts for **35%** of your FICO® Score . This means that paying your bills on time and in full every month is
Does having too many credit accounts affect your credit score?
Using credit wisely and demonstrating responsible repayment behavior will have a positive impact on your credit score. Additionally, lenders also consider the total number of credit accounts you have. Having too many credit accounts can be seen as a risk because it may indicate that you are relying heavily on credit.
How does new credit affect my credit score?
The amount of new credit you apply for and obtain can have an impact on your credit score. This factor accounts for approximately 10% of your overall score. Lenders consider new credit as an indicator of increased financial risk, especially if there is a sudden influx of new accounts or credit inquiries.