Credit scores, demystified
A risk model, not a report card. The two factors that do most of the work, the fastest lever you have, and the expensive myth about carrying a balance.
A plain-language reference, not advice. Describes the FICO model’s publicly stated factor weights and general scoring behaviour. Exact algorithms are proprietary; the weights below are FICO’s own approximate public breakdown and are flagged for confirmation. VantageScore differs in detail.
Part of Financial 101 — free, plain-language reference guides. Not personalised advice. Download the one-page Order of Operations checklist.
What the number is for
A credit score is a lender’s estimate of how likely you are to pay back money, compressed into a three-digit number. It is not a measure of wealth, income, or financial virtue. Plenty of wealthy people have mediocre scores because they rarely borrow, and plenty of people with modest incomes have excellent ones because they pay on time. It matters when you want to borrow — a mortgage, a car loan, sometimes an apartment lease or an insurance quote — and it matters very little otherwise.
That framing helps, because a lot of credit-score folklore comes from treating it as a report card. It is not. It is a risk model, and risk models respond to specific inputs.
The five factors
| Factor | Approx. weight | What it actually measures |
|---|---|---|
| Payment history | ~35% | Whether you have paid on time. Late payments, collections, bankruptcies. |
| Amounts owed | ~30% | Mostly utilisation: balances relative to credit limits, per card and overall. |
| Length of history | ~15% | Age of oldest account, average age of accounts. |
| Credit mix | ~10% | Having managed both revolving (cards) and instalment (loans) credit. |
| New credit | ~10% | Recent applications and newly opened accounts. |
Two of these do most of the work. Pay every bill on time, every time, and keep card balances low relative to limits, and you will have a good score. Everything else is refinement.
What moves it
Paying on time. A single payment more than 30 days late can drop a strong score substantially and stays on the report for years. Autopay at least the minimum on everything, even if you pay the rest manually.
Utilisation. Balances as a share of limits, reported around each statement date. Lower is better, and it has no memory: pay a card down and the score recovers as soon as the lower balance is reported. This is the fastest lever you have. Keeping utilisation under about a third of limits is the usual guidance; single digits scores best.
Time. Old accounts help. This is why closing your oldest card can hurt, and why the advice is usually to keep it open with a small recurring charge on it.
Applications. Each hard inquiry dents the score a little for a while. Several mortgage or auto inquiries in a short window are treated as one, so shopping for a rate is fine. Applying for five store cards in a month is not.
What does not move it
Your income. Your savings. Checking your own score (a soft inquiry). Debit card use. Paying interest — carrying a balance does nothing for your score that paying in full does not do better, which is the single most expensive myth in personal finance. Your employer, age, or where you live.
Building one from nothing
A secured card or a starter card used lightly and paid in full each month, for a year or two. Being added as an authorised user on a family member’s long-standing, well-managed card can help. Some services report rent and utility payments. There is no shortcut, and anything sold as one deserves suspicion.
Your reports
The score is computed from your credit reports, one at each of the three bureaus, and the reports contain errors more often than they should. Federal law entitles you to free copies; pull them, read them, and dispute anything wrong. Consider a credit freeze at all three bureaus — free, reversible, and the single most effective defence against someone opening accounts in your name.
Checklist
Autopay at least the minimum everywhere · Card balances low relative to limits at statement time · Oldest account kept open · No unnecessary applications · Reports pulled and read once a year · Credit frozen at all three bureaus unless actively applying.
Related: Credit cards · Banking basics · Financial 101
Verification queue
Check each of these before publishing, then delete this block.
- FICO factor weights (35/30/15/10/10) — confirm on myfico.com; label as approximate.
- How long late payments remain on reports (commonly seven years) — confirm on CFPB or bureau sites before stating a number.
- Rate-shopping inquiry window (14–45 days depending on model) — confirm before adding specifics.
- Free credit report entitlement (annualcreditreport.com; frequency has changed since 2020) — confirm current rules.
- Credit freeze being free at all three bureaus — confirm under current federal law.
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