What Affects Your Credit Score (2024)

FAQs

What factors affect your credit score? ›

The primary factors that affect your credit score include payment history, the amount of debt you owe, how long you've been using credit, new or recent credit, and types of credit used. Each factor is weighted differently in your score.

Most important: Payment history

Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.

These three factors affect your credit score: Type of debt, new debt, and duration of debt.

What financial behaviors will typically lead to a low credit score? Maxing out your credit cards will typically lower your credit score. Your payment history and your amount of debt has the largest impact on your credit score.

Many factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly. Credit reference agencies collect information from public records, lenders and other service providers, before generating a credit score.

Paying with a debit card

Using a debit card, rather than a credit card, to pay for items typically won't impact your credit history or credit scores. When you pay with a credit card, you're essentially borrowing the funds to pay back later. With a debit card, you're using money you already have in an account.

Payment history, debt-to-credit ratio, length of credit history, new credit, and the amount of credit you have all play a role in your credit report and credit score.

Your credit score won't be impacted by how much money you have in the bank or in your investment portfolio. Additionally, an inactive savings account with a negative or zero bank balance has no impact either.

Making a late payment

Even one late payment on a credit card account or loan can result in a credit score decrease, depending on the scoring model used. In addition, late payments remain on your Equifax credit report for seven years. It's always best to pay your bills on time, every time.

Making a Late Payment

Every late payment shows up on your credit score and having a history of late payments combined with closed accounts will negatively impact your credit for quite some time. All you have to do to break this habit is make your payments on time.

What lowers a credit score? ›

Reasons why your credit score could have dropped include a missing or late payment, a recent application for new credit, running up a large credit card balance or closing a credit card.

Final answer:

A missed payment, a late payment, and an increase in debt amount can decrease your credit score.

If you make a late payment, miss a payment or pay less than is required by your credit agreement, it all gets added to your credit history. Over time, this could lead to your credit score being classified as 'very poor' or 'poor' by the credit reference agencies that determine how easily you can borrow money.

Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.