5 Credit Score Factors You Should Know

5 Credit Score Factors You Should Know

5 Credit Score Factors You Should Know

If you have recently applied for a credit card, loan, or mortgage, you probably know that your creditor checked your credit score before deciding whether to lend to you. But you may still be unsure about what exactly a credit score is or how it’s calculated. The following is a summary of five important credit score factors that could help to make sense of your score, with ways to develop the skills to improve it.

First, we’ll discuss exactly what a credit score is, how it’s determined, and what constitutes a good score in the eyes of creditors.

What is a credit score?

A credit score is a number that symbolizes your creditworthiness based on your credit history. Your credit score factors into a lender’s determination of whether you are a safe borrower—but it can be used for many other purposes, as well. Companies use your credit score to determine if they should approve you for things like credit cards and mortgages, but also may use it when deciding about jobs or property rental contracts.

When you have a high credit score, you’re more likely to qualify and get the best rates. On the other hand, as your credit score decreases, it’ll be harder to find someone who will lend to you, and your rates will likely increase.

How is your credit score determined?

Your score is determined by measuring different factors in your credit history. The most trusted measure is the FICO score, created by the Fair Isaac Corporation, and widely used to calculate a person’s creditworthiness.

There is also the VantageScore, developed by a partnership between three credit reporting agencies: Equifax, Transunion, and Experian. It is also a measure of creditworthiness, but it’s used less often than the FICO Score.

Both FICO and VantageScore range from 300 to 850, but they’re calculated in slightly different ways. With both kinds of credit scoring models, the higher your score, the lower the risk for the lender. The following tables show how the different credit score ranges work:

FICO score ranges






Almost guaranteed approval for most types

of credit, including top credit cards with

the best rewards, the absolute lowest

interest rates and fees.


Very Good

Likely approval for almost any type of

credit and favorable rates and fees from




Likely credit approval, and competitive credit

Rates, but not the ideal rates obtained by

“very good” and “exceptional” scorers.

Additionally, it may be harder to qualify for

some types of credit.



Many lenders will approve applicants with

“fair” credit but borrowers will be unlikely to

receive competitive interest rates.


Very Poor

Credit applicants may be required to

pay a fee or deposit, or may not

be approved for credit at all.

Vantage score ranges






Applicants most likely to receive the best

rates and most favorable terms on credit




Applicants likely to be approved for credit

at competitive rates.



Applicants may be approved for credit, but

likely not at competitive rates.



Applicants may be approved for some credit,

though rates may be unfavorable and come

with conditions such as larger down



Very Poor

Applicants will not likely be approved for


When looking at your credit score it’s important to be aware of which kind is being used so you have a clear understanding of where you stand. There are a number of different credit score factors to be aware of.

What are the main credit score factors?

There are five main factors for determining a person’s credit score:

  1. Payment history. The record of payments you have made to lenders in the past, and whether or not they were on time. This is the most important credit score factor because it demonstrates your payment habits in a very transparent way, and is considered the best indicator of your ability to make payments in the future.

  2. Credit utilization. The percentage of your available credit being actively used. If you are constantly at the upper edge of your available credit, say maxing out multiple cards, or only making only the minimum payments, you can be seen as a risky borrower. It is generally recommended that you keep your credit usage below 30% of your available credit.

  3. Length of credit history. The length of time you have had open credit accounts. The longer your credit history the more data a lender has on your creditworthiness.

  4. Credit mix. The combination of credit accounts you have: credit cards, student loans, mortgages, car loans, etc. It is not necessarily a major factor in your score unless you have very little in the way of other factors represented in your credit history.

  5. New credit. The number of new accounts you have opened at the time your credit score is being viewed. Several new accounts opened in a short time period can be a red flag to lenders.

FICO has rolled out a new way of calculating credit scores called UltraFICO. This takes the established FICO score, which accounts for the factors mentioned above, and augments it with information from your bank account. As UltraFICO gains more popularity, credit scores may be calculated differently—but it’s still unclear how drastically your score will change as a result.

What makes a good credit score?

Developing good credit is a matter of thinking about the factors that impact it. If you are striving for a good credit score, here are some actions that could help:

  • Make sure to always make payments on time.

  • Keep your credit utilization low (under 30 percent of your available credit).

  • Only borrow what you can actually pay back on time.

  • Always pay your balance in full each month.

  • Look for errors on your credit report and take steps to have them corrected.

It might take a little time for your credit score to get to the place you want it to be, but it doesn’t have to be stressful. You have all the tools you need to take charge of your score right at your fingertips; it’s just a matter of using them strategically and consistently.

Boost your credit score and your overall financial health

Learning how to deal with debt, money, and planning for your future doesn’t need to be difficult. If you’re learning about credit score factors, then you’re already moving in the right direction. Our simple-to-follow financial guide will help you find the tools you need for a brighter future. Get started by downloading our free guide right now.


Kate Robinson Beckwith is a freelance writer who loves to use her way with words to help people get a better understanding of their finances. She lives in the Bay Area where she spends her weekends taking in culture, making books, and hiking with her husband and her goofy three-legged pitbull mix.