What a score is measuring
Scoring models look at the information in your credit report and produce a number, usually on a scale from 300 to 850. Higher means a lender expects less trouble. That is the whole idea. The score does not know your income, your savings, your job title or whether you are good with money in any broader sense — only what your report contains.
You do not have one score. You have several, because there are multiple credit bureaus and multiple scoring models, and lenders choose which to use. A twenty-point difference between two numbers is normal and does not mean one of them is wrong.
The five factors, and roughly what they weigh
| Factor | Weight | What it means in practice |
|---|---|---|
| Payment history | About 35% | Whether you pay on time. A single payment 30+ days late does real damage; being a few days late rarely reaches your report at all. |
| Amounts owed | About 30% | Mostly credit utilisation: your balances against your limits. The most fixable factor on this list. |
| Length of history | About 15% | How long your accounts have been open, including the average age. Time is the only thing that improves it. |
| Credit mix | About 10% | Whether you have handled both revolving accounts (cards) and instalment accounts (loans). Do not borrow just to diversify. |
| New credit | About 10% | Recent hard inquiries and newly opened accounts. Several in a short window suggests need. |
These weights are the published general structure of the most widely used models. Your own file may weigh things differently — someone with a thin file is affected far more by a single new account than someone with twenty years of history.
Utilisation: the lever that moves fastest
Credit utilisation is your balance divided by your limit. If you have a $5,000 limit and a $2,000 balance, you are at 40 per cent. Lower is better, and the number is generally recalculated every time your card issuer reports — which means this is the one factor that can change within a single billing cycle.
Three things people get wrong about it:
- It is measured on the reported balance, not the balance after you pay. Issuers usually report the statement balance. Paying in full every month is excellent for your finances, but if you run a large balance before the statement date, that large balance is what the bureau sees. Paying down before the statement closes is the trick.
- Carrying a balance does not help. There is no scoring benefit to paying interest. This myth costs people real money.
- Closing a card can hurt. Closing removes that limit from the calculation, which raises your utilisation on the remaining accounts, and eventually shortens your average account age. If there is no annual fee, leaving an old card open and unused is usually better.
What does not affect your score at all
- Checking your own report or score. That is a soft inquiry and has no effect, ever.
- Your income, savings, or the balance in your bank account.
- Your age, marital status, employer, or where you live.
- Using a debit card, or paying for things in cash.
- Most utility, phone and rent payments — unless the provider reports them, or you opt into a service that adds them, or the account goes to collections.
Hard inquiry versus soft inquiry
A soft inquiry — you checking your own file, a pre-qualification offer, an existing lender reviewing your account — is invisible to scoring. A hard inquiry happens when you formally apply for credit and typically costs a small number of points for a limited period.
Rate shopping for one loan is treated sensibly: multiple inquiries of the same type inside a short window are generally counted as one event, so comparing mortgage or car loan offers over a couple of weeks does not stack up damage.
How long negative marks last
| Item | Typically stays |
|---|---|
| Hard inquiry | 2 years on the report; usually affects scoring for about 1 |
| Late payment (30/60/90 days) | 7 years, with impact fading over time |
| Collection account | 7 years from the original delinquency |
| Chapter 13 bankruptcy | 7 years |
| Chapter 7 bankruptcy | 10 years |
| Closed account in good standing | Up to 10 years — and it helps while it is there |
The important detail is that impact fades long before the item disappears. A late payment from four years ago hurts far less than one from four months ago, even though both are still on the file.
Things that genuinely help
- Never miss a payment. Automate at least the minimum on everything. This is the largest factor and the easiest to protect.
- Bring utilisation down and keep it there. Pay before the statement date if you use a card heavily.
- Ask for a limit increase on a card you handle well. A higher limit with the same balance is lower utilisation. Check whether the issuer does it without a hard inquiry.
- Leave old accounts open. Age is earned, not bought.
- Space out applications. If you know a mortgage is coming, avoid opening new accounts in the months before.
- Check your report for errors. Accounts that are not yours, wrong balances and duplicated collections are common, and disputing them is free.
On credit repair companies
Nobody can lawfully remove accurate, current negative information from your report. Any company promising to do so is selling something that does not exist. Everything a legitimate repair service does — disputing genuine errors with the bureaus — you can do yourself, for free. Be especially wary of anyone asking for payment before doing any work.
Where to go next
If high balances are the thing holding your score down, the fastest route is paying them off in a structured way — compare methods with our snowball versus avalanche calculator. If missed payments are the problem, the underlying issue is usually cash-flow timing, which a working budget and an emergency fund address better than any credit tactic can. Thinking about applying for something? Start with when borrowing makes sense.