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Top 9 Factors That Can Affect Your Credit Score

Top 9 Factors That Can Affect Your Credit Score

The Petal Team

There are a lot of reasons to want to increase your credit score. A higher score gets you access to lower interest rates, which makes borrowing money cheaper. Bumping up that score can also open doors to higher limits on your existing cards and make you more likely to be approved for important purchases, including a car or home.

So, how can you improve your score? What things will harm it? We take a look at the actions that can affect your score, as well as dispel myths around those that won’t.

Top 5 credit score factors

When talking about actions that can directly affect your score, it’s important to clarify that some actions will have a bigger impact than others. For that reason, we’ll list the factors that affect credit scores with those having the biggest impact at the top of the list:

1. Payment history

It should come as no surprise that not paying your bills, especially on existing credit cards, can quickly bring down your score. FICO and other credit scoring models consider this factor of the highest importance. Your payment history accounts for 35 percent of your total credit score.

What counts in your payment history? Typically, your credit cards and loans are included as well as these accounts:

●     Home mortgage

●     Car loans

●     Student loans

●     Cell phone bills

●     Medical bills

●     Store credit accounts

●     Bank lines of credit

One late payment may not have a huge impact on your score, but several will. A pattern of late payment behavior is a telling sign to creditors that you are a higher credit risk, and your score will change to reflect that.

It's also much harder to raise a score once it's lowered due to late payments, so do your best to keep those payments coming on time. If you can't make a monthly payment, get on the phone with your creditor before the due date, and see what can be done to give you a little more time to pay.

2. Credit utilization

This term sounds complicated, but it’s simply a number that shows how much of your available credit is currently being used. If you have a $10,000 credit card, for example, and you’ve charged $4,000 to it, your utilization is 40 percent for that card. Your credit score looks at all of your credit cards and loans, however, and totals up what you owe, then compares it to your available credit limits. This ratio accounts for 30 percent of your credit score, so it's very important!

Improving your credit utilization ratio is one of the quickest ways to boost a credit score. FICO and other scores like to see you below 30 percent utilization, so if you’re hovering just slightly over that, pay down a card or two and watch your score improve. The best credit scores have utilization of under 10 percent.

"Improving your credit utilization ratio is one of the quickest ways to boost a credit score."

3. Credit age and history

If you’re very young and just starting out with credit, your score will reflect that. Credit age is about 15 percent of your credit score, and the scoring agencies will consider both the age of your oldest account and the average age of all of your accounts.

For new credit holders, there’s not much you can do but continue using your credit wisely and wait for your accounts to get older. Closing old accounts, even if you don’t use them, will shorten the overall average account age. Opening a new account will do this as well. Keep your accounts as long as it makes sense so that your oldest account can continue boosting your credit score.

4. Credit mix and account types

There’s something to be said for variety, especially when talking about credit. Lenders like to see that you can handle all kinds of credit accounts and loans, and you’ll be rewarded for handling different types of credit responsibly with an improved credit score. This category makes up just 10 percent of your score, so how can you make it work for you?

Be aware of the two types of credit accounts: revolving (such as credit cards and lines of credit) and installment loans (like your mortgage or car payment). Having a little of both is the best way to keep your score in tip-top shape.

5. Credit inquiries

As you can expect, a lender will run a credit report on you any time you apply fora credit card or a loan, and this inquiry can ding your credit score by a few points for a limited time. This type of inquiry is called a "hard inquiry" since it does affect your credit score.

The other type of credit inquiry, a "soft inquiry," is what companies or landlords may run as a condition of doing business with you. You most likely don’t even know that one has been run, and since it doesn’t affect your score, it’s not usually a big deal.

Hard credit inquiries make up 10 percent of your total credit score, so have them performed sparingly.

What else can hurt your credit score?

We’ve covered the things that FICO and others use to create your score, but certain additional actions can bring a good score down—or further harm an already fragile score.

1. Reporting errors

Everyone makes mistakes. Even reporting agencies occasionally get bad information that can make its way to your credit history and bring down your credit score. Whether someone typed in the wrong info—or a hacker stole your identity—the results can be devastating to an otherwise healthy score.

To keep tabs on the situation, request your annual free credit report from the official website. Never pay to see your credit report and don’t visit unauthorized sites. You can check your histories on all three agencies (Equifax, Experian, and TransUnion) and catch any inaccuracies so you can set them right. Dispute any errors with the credit bureau directly, and don’t stop until you seek a full resolution.

"Request your annual free credit report from the official website. Never pay to see your credit report and don’t visit unauthorized sites. "

2. Missing payments

Did you pay a bill, but now it’s showing up as a late payment on your credit history or credit report? This type of error happens, and you’ll need to take it to the service provider first. Bring documentation of your payment being made and accepted, and work with them to get it cleared on your credit history.This can take time, but it’s worth removing any signs of missed payments from your report.

3. Utility bills

Your electricity, gas, and even your phone bill can cause your score to drop if you don’t pay on time. Even if your utility company doesn't directly report to credit agencies, debt that's allowed to sit for too long eventually gets sold to debt collection companies. That debt is then reported. To keep your score healthy, never ignore your water and power bills.

4. Medical bills

There are a few ways that your unpaid doctor or hospital bill can cause trouble for your credit. One way is when you use a credit card to pay and then fail to pay your credit account in a timely manner. Another way is when you allow a balance to grow at the doctor’s office directly and don’t set up a proper payment arrangement to cover it. No matter who you need to pay, ignoring medical bills can get your score in big trouble.

What won't be included in your credit score

Your credit score is based on financial factors that tell lenders whether you would be a good credit risk. Things that don’t affect your score include:


●     Your age

●     Ethnicity, race, or country of origin

●     How much you make

●     Whether you receive public assistance (ADC, SNAP, Medicaid, etc.)

●     Location

●     Your work history

●     Family composition and responsibilities

●     Participation in credit counseling


The bank or credit company may ask questions about how much you earn, for example, to decide if you earn enough to make minimum monthly payments on a mortgage. While some factors do matter in getting approved, they aren't tied in any way to your actual FICO credit score.

If you’re new to credit or looking to build your credit, Petal can help.

Learn more about our card and how it stands up to the competition today!


Petal Card issued by WebBank, Member FDIC.