How Credit Scores Work
A plain-English breakdown of what goes into your credit score and how much each factor really matters.
In This Article
The Two Main Scoring Models
FICO Score and VantageScore are the two dominant credit scoring models in the U.S. Both range roughly from 300–850 and weigh similar factors, though their exact formulas differ slightly.
The Five Main Factors (FICO)
- Payment history (~35%), on-time vs. late payments
- Credit utilization (~30%), how much of your available credit you're using
- Length of credit history (~15%), how long your accounts have been open
- New credit (~10%), recent applications and inquiries
- Credit mix (~10%), variety of account types (cards, loans, mortgages)
What Doesn't Affect Your Score
Income, employment status, age, and checking your own credit report do not directly affect your score. Soft inquiries (like checking your own score) don't lower it.
Why Scores Can Drop Fast but Recover Slowly
A single late payment can drop your score quickly, especially from a high starting point, but rebuilding typically requires months of consistent on-time payments and low utilization.
How Debt Settlement Affects the Formula
Settlement primarily impacts the payment history factor (missed payments) and can affect utilization while balances remain unpaid. Once accounts are resolved, both factors can begin improving again.
Building a Better Score Going Forward
Focus on the two biggest levers: paying everything on time, and keeping utilization low. These two factors alone account for roughly two-thirds of most credit scores.
The Five Main Factors in Your FICO Score
- 1Payment history (~35%), on-time vs. late payments
- 2Credit utilization (~30%), how much of your available credit you're using
- 3Length of credit history (~15%), how long your accounts have been open
- 4New credit (~10%), recent applications and inquiries
- 5Credit mix (~10%), variety of account types (cards, loans, mortgages)
Payment history and utilization alone account for roughly two-thirds of most credit scores.
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This article was researched using publicly available information from government agencies, consumer protection organizations, and, where applicable, official lender or provider disclosures. Sources were compared for accuracy before publication and are periodically reviewed for updates. See our Research Process and Content Review Policy for details.
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