5 things that affect your credit score — plus 6 things that don't

By Eric Rosenberg

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Your credit score is one of the most important numbers for your personal finances. Your credit score can be a determining factor in getting approved for a new loan. And if you're approved, it can decide your interest rate. For a mortgage, for example, that difference in interest rate can be worth tens of thousands of dollars over the life of a loan.

Understanding what goes into your credit report — which reflects all the information factored into your score — is important for your long-term financial health. However, there are many common credit report and credit score myths and misconceptions — let's separate fact from fiction to make sure your finances move in the right direction. Here's a list of what can and can't affect your credit score.

What affects your credit score

Payment history

The biggest factor in your credit score is your payment history. Paying on time every month is the single best thing you can do for your credit. Under the most popular credit score model, your payment history is 35% of your FICO credit score.

It takes seven years for a late payment to fall off of your credit report. Setting up automatic recurring payments can help you avoid an accidental late payment.

Credit balances

Your credit balances and utilization are the next biggest factor in your credit score, making up 30% of your score. As a general rule, to get the best results from this part of your credit score, you should keep your credit card and line of credit balances as low as possible.

Your credit utilization is your total outstanding credit card balances divided by your total credit card limits. Try to use less than 20% to 30% of your credit for a good credit score. Keeping it as close to 0% as possible is best for your credit.
If you have high credit card balances, one of the fastest ways to raise your credit score is to pay off your cards. That's often easier said than done, but it's a smart strategy if you're able to do it.

Credit account age

A long history of well-managed credit accounts is evidence that you are a responsible borrower. The average age of your credit accounts is the third-biggest factor in your credit score, with a 15% weight.

A bunch of new accounts lowers your average account age, while accounts that you've had the longest help your average account age. Avoid opening new credit accounts unless you need them, and avoid closing old accounts unless to get the best results here for your credit.

Keep in mind that if you want to stop paying for a card with an annual fee, you can downgrade your card to a no-annual-fee option instead of canceling it. This will preserve the age of your original card's account, avoiding any damage to your credit score.

Mix of credit accounts

Just as a long credit history shows you can handle credit well, a mix of different types of credit account types helps your credit score. That means you're best off if you have credit cards and installment loans, like a mortgage or auto loan. More unique types of loans is best for your credit.

However, that doesn't mean you should get a new loan just to help your credit in most cases. Instead, just apply for the credit you need and watch as your score slowly rises over time when you manage your loans well. Your credit mix makes up 10% of your credit score.

New credit

The last main category is the pursuit of new credit. As a general rule, new credit is bad for your credit score, but only temporarily. New credit applications lead to an inquiry on your credit report, which slightly hurts your credit score.
In addition, if you're approved, a new credit account lowers your average age of credit. This negative impact goes down over time and eventually becomes a positive factor. But in the short term, new credit is bad for your credit.

What doesn't affect your credit score

Bank accounts

Contrary to popular belief, bank overdrafts don't hurt your credit. In fact, nothing from your check or savings accounts directly shows up on your credit report or in your credit score. Banks use a different system, known as ChexSystems, to track overdrafts and other banking information. You can request a free ChexSystems FACTA report here.

Utility and phone bills

Your power, water, gas, and phone bills don't generally show up on your credit report. These companies may check your credit when you open a new account, but they typically don't send your payment information to the credit bureaus for credit reporting. That's slowly starting to change, however, as optional credit-boosting programs like Experian Boost start offering to give you "credit" for paying non-credit bills on time.

Your income and assets

It doesn't matter to the credit bureaus if you make $1 per year or $1 million per year. Your credit report is all about paying your credit-related bills on-time and managing the balances well. Even if you have a ton of money in the bank, you can have a bad credit score if you miss payment due dates.

Checking your credit score yourself

Services like Credit Karma, Credit Sesame, and personal credit-reporting tools from your bank don't hurt your credit score. These are considered soft inquiries, which are visible to you but not to lenders. When you apply for new credit, the hard inquiry on your credit report does impact your credit score.


If you're buying a new car or home, it's not a bad idea to shop around for the best interest rates. While each application will generate a new inquiry, the credit bureaus typically bundle inquires from a short period of time and treat them as a single inquiry for credit scoring purposes.

Anything from a non-credit account

Investments, insurance, and other accounts that don't involve any borrowing generally don't show up on your credit report in any way. Credit reports and credit scores have the word "credit" right in the name. Non-credit means it's a non-factor for your credit score.

Actively manage your credit for an 800+ credit score

While you should avoid opening new accounts regularly, particularly if you plan to get a mortgage in the next six months, it's a good idea to keep tabs on your credit and work to improve your credit score over time.

Good credit is extremely valuable for your financial health. Now that you know what's involved, and what isn't, you can work to join the 800+ club of excellent credit scores where you get the best rates and credit cards available. You might not need your credit today, but it's a good asset to have while managing your financial life.