If you’ve ever checked your credit score and watched it drop for no clear reason, you’re not imagining it. The most common score, FICO, is built from five parts, and they don’t count equally.
The five parts
- Payment history, about 35%. Did you pay on time? One payment that’s 30 days late can do real damage.
- Amounts owed, about 30%. Mostly how much of your credit limit you’re using. Using $900 of a $1,000 limit looks worse than using $900 of $5,000.
- Length of history, about 15%. How long your accounts have been open.
- New credit, about 10%. Opening a lot of accounts in a short time.
- Credit mix, about 10%. Having different kinds of credit, like a card and a car loan.
The part people miss
Your balance is usually reported once a month, on the statement date, and not on the day you pay. So if you pay your card in full every month but the statement shows a high balance, your score can still dip. Paying a few days before the statement closes fixes that.
Why it matters now
Landlords, car lenders and some employers look at this number. A difference of 50 points can change the interest rate on a car loan enough to cost hundreds of dollars a year.
The good news is the biggest piece, paying on time, is the one you control most.
Sources: myFICO, What’s in my FICO Scores