The primary factors that affect your credit score include payment history, the amount of debt you owe, how long you've been using credit, new or recent credit, and types of credit used.
Payment History: 35%
Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you.
Race, religion, national origin, sex, and marital status
The Consumer Credit Protection Act prohibits the use of this information by lenders, as well as the receipt of any public assistance, or the exercise of any of your consumer rights.
Because payment history is the most important factor in making up your credit score, paying all your bills on time every month is critical to improving your credit.
It's not just late payments on credit cards that can affect your credit. Late payments on utilities, rent, phone or loans can have a negative impact as well.
Your score falls within the range of scores, from 300 to 579, considered Very Poor. A 500 FICO® Score is significantly below the average credit score. Many lenders choose not to do business with borrowers whose scores fall in the Very Poor range, on grounds they have unfavorable credit.
Many factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly. Credit reference agencies collect information from public records, lenders and other service providers, before generating a credit score.
Why might my credit scores drop after paying off debts? Paying off debt might lower your credit scores if removing the debt affects certain factors such as your credit mix, the length of your credit history or your credit utilization ratio.
The two major scoring companies in the U.S., FICO and VantageScore, differ a bit in their approaches, but they agree on the two factors that are most important. Payment history and credit utilization, the portion of your credit limits that you actually use, make up more than half of your credit scores.
Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2022, the average FICO® Score☉ in the U.S. reached 714.
You can build credit by using your credit card and paying on time, every time. Pay off your balances in full each month to avoid paying finance charges. Paying off your balance each month can also build better credit than carrying a balance, because it helps keep you from getting too close to your credit limit.
Your bank account information doesn't show up on your credit report, nor does it impact your credit score. Yet lenders use information about your checking, savings and assets to determine whether you have the capacity to take on more debt.
The 5 Cs are Character, Capacity, Capital, Collateral, and Conditions. The 5 Cs are factored into most lenders' risk rating and pricing models to support effective loan structures and mitigate credit risk.
FICO® Scores consider a wide range of information on your credit report. However, they do not consider: Your race, color, religion, national origin, sex and marital status.
The lender will typically follow what is called the Five Cs of Credit: Character, Capacity, Capital, Collateral and Conditions. Examining each of these things helps the lender determine the level of risk associated with providing the borrower with the requested funds.