Before we discuss how to achieve an ideal credit score, we need to understand what factors comprise and impact it. There are 3 credit bureaus — Experian, Equifax, and TransUnion — that are always tracking your credit score independently. Your score at each bureau is completely independent of your score at the others. For example, an apartment manager who checks your credit may only look at Experian, while a credit card company might only look at TransUnion.
The Five Key Factors
These factors do not equally impact your credit score. Let's go through each one in detail.
1. Credit Enquiries — 10%
Also known as a hard pull, this accounts for 10% of your credit score. Your credit may be pulled for renting a house, applying for a new credit card, getting a mortgage, and more. A soft pull (like checking your own credit) does not impact your score. A hard pull (like applying for a mortgage) will hit your score. Plan card applications carefully — especially before big financial events.
2. Credit Utilization — 30%
This is the percentage of credit used across all your accounts compared to the total credit available. Some credit bureaus track accounts individually; others track them combined. For example, if you have 1 credit card with a $1,000 limit and your bill is $700, your utilization is 70% — which is high.
Under 30% — safe from negative impact
Under 10% — good for your score
Under 6% — optimal
3. Average Age of Credit Accounts — 15%
This is the average age of all credit accounts on file. The formula is straightforward:
Average Age = (A1 + A2 + A3 + ... + An) / n
Where A1, A2... An are the ages of each account and n is the total number of accounts. Opening new accounts lowers this average — but as shown in a related post, having more established accounts reduces the impact of any new account.
4. Payment History — 35%
Payment history is the single most important factor at 35% of your score. Most lenders give you approximately 25 days after your billing date to pay (the due date). If you miss the minimum payment by that date, you are marked as a defaulter for that month, charged a late fee, and reported to the credit bureaus.
5. Credit Mix — 10%
This shows what types of credit you have. The more different kinds you have — mortgages, car loans, student loans, credit cards — the better your chances of a strong score. Accounts are classified as:
- Revolving accounts — Credit cards (balance can increase or decrease each cycle)
- Installment accounts — Mortgages, student loans, auto loans (balance only decreases)
A healthy mix of both types demonstrates to lenders that you can manage different kinds of financial obligations.