Your credit score is one of the most critical aspects of your financial life. This three-digit number, ranging from 300 to 850, represents your creditworthiness to lenders, landlords, and sometimes even employers. Understanding what affects your credit score can empower you to make better financial decisions and achieve your financial goals. Here’s a breakdown of the factors influencing your credit score and how you can manage them effectively.
 

Payment History (35%)

The most significant factor in your credit score is your payment history. Lenders want to know if you consistently pay your bills on time. Late payments, defaults, foreclosures, or bankruptcies can significantly harm your score.

How to improve:
• Always pay at least the minimum amount due on time.
• Set up reminders or enroll in automatic payments to avoid missed or late payments.
• If you’ve missed a payment, catch up as soon as possible because the longer a payment remains overdue, the more it affects your score.

Credit Utilization Ratio (30%)

Your credit utilization ratio measures how much of your available credit you’re using. For example, if your credit limit is $10,000 and you’re carrying a balance of $2,000, your utilization ratio is 20%. Lenders use your credit utilization ratio to determine how responsible you are when it comes to managing credit. The lower the ratio, the better chance you have of improving your credit score.

How to improve:
• Aim to keep your utilization below 30%. Ideally, keeping it under 10% can maximize your score.
• Pay down balances consistently, especially on high-interest accounts.
• Request a credit limit increase—but only if you can manage the temptation to overspend.

Length of Credit History (15%)

This factor considers how long your credit accounts have been open. A longer credit history shows lenders you have experience managing credit responsibly.

How to improve:
• Keep older accounts open, even if you no longer use them regularly. Closing an old account can shorten your credit history.
• Be patient—building a long credit history takes time, but steady and responsible use will pay off.

Credit Mix (10%)

Lenders like to see a variety of credit types in your profile, such as credit cards, auto loans, mortgages, and personal loans. A diverse credit mix can show you’re capable of managing different types of credit responsibly.

How to improve:
• Avoid opening unnecessary accounts to diversify your credit mix—it’s not worth the risk of overextending yourself financially.
• If you lack installment loans or credit cards, consider adding one to build a more varied credit profile.

New Credit Inquiries (10%)

Every time you apply for credit, a hard inquiry is placed on your credit report. Too many inquiries in a short period can signal financial distress to lenders.

How to improve:
• Space out applications for new credit, especially if you’re planning a major purchase like a home or car.
• Check your credit report to ensure inquiries were authorized and dispute any errors.

Regularly Review Your Credit Report

Another helpful tip, is to review your credit report regularly. Errors on your credit report can hurt your score. Dispute inaccuracies promptly. You can request free weekly reports from each of the three major credit bureaus—Experian, Equifax, and TransUnion at AnnualCreditReport.com.

As a Partner Colorado member, you can also access your FICO® Credit Score via our Mobile Banking App.

Understanding and managing the factors that influence your credit score is essential for financial success. By maintaining good habits like timely payments, low credit utilization, and careful account management, you can build a healthy credit score that opens doors to better financial opportunities.