Paying on time is the biggest part of your FICO Score, but typically only 35%. The other 65% comes from how much of your credit limits you use, how old your accounts are, how often you apply for credit, and your mix of accounts. Start with your card balances, the piece you can change fastest.
That’s why a spotless payment record can sit beside a middling score. Paying on time protects the largest piece, but it can’t make up for maxed-out cards, a thin history, or a string of recent applications.
For the general population, FICO puts payment history at 35% of the score, amounts owed at 30%, length of credit history at 15%, and new credit and credit mix at 10% each. FICO notes that the weights differ from one credit profile to another.
The second-biggest piece is also the easiest to move. Amounts owed leans heavily on your credit utilization, the share of your card limits that your balances use. Issuers typically report each card’s balance when its statement closes, so a card you pay in full every month can still report a high balance if you run it up before that date.
Pay your cards down before each statement closes so a smaller balance reports, and keep total use under 10% of your limits. FICO says lower is better and that its data shows no sudden drop at the often-quoted 30% mark.
Keep old cards open, even the ones you rarely use. Closing a card removes its limit from your available credit, which raises your utilization without any change in what you owe. If one of those cards charges an annual fee, ask the issuer to switch it to a no-fee card, which keeps the account open and can keep its credit line. Space out new applications, too. Each one adds a hard inquiry, a lender’s check of your credit, and FICO counts those from the past 12 months. Every new account also pulls down the average age of your accounts.
Leave credit mix alone. At 10% of the score, it doesn’t justify a loan you don’t need, and FICO itself says not to start applying for types of credit you don’t have.
Pull your free reports at AnnualCreditReport.com this week and compare each card’s reported balance with its limit. That ratio resets every month, so it’s the part of your score you can improve first.
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
