A good credit score could be the difference between getting approved or denied for a new loan, credit card, or even a rental apartment. A high score can increase your chances of getting approved for the best rates and terms, while a low score could lead to denials or less-than-desired terms.


While the exact algorithms that credit-scoring agencies use to determine your scores are closely held secrets, there’s a lot of public information about the general types of actions that can help or hurt your scores.


Learning what affects your credit scores can be an important first step in knowing what you should and shouldn’t do if you want to have excellent credit.


Only information that’s in your credit report can affect your credit scores

Your credit scores are based entirely on the information that’s in one of your credit reports.


There are three main national consumer credit reporting agencies—Equifax, Experian, and TransUnion. Each credit bureau receives, collects, and organizes information about consumers and uses the data to create credit reports. Your credit reports from the bureaus are often similar, but there could be differences.


For example, a creditor may pull your Equifax credit report to check your credit history when you apply for a loan. The Equifax report will have a record of that check, called a hard inquiry, for the following two years. But the other two reports might not.


Also, some creditors, including RISE, only report data to one or two of the credit bureaus. So, your account information will only appear on one or two reports and affect the credit scores that are based on those reports.


You can have many (different) credit scores

As you’re learning about what affects your credit scores, keep in mind that there are many different credit scores. You may notice you get a different score depending on where you check your credit, and the scores may rise or fall at different rates.


Credit-scoring agencies, most notably FICO and VantageScore, develop credit-scoring models which analyze a credit report to generate a score—often ranging from 300 to 850.


FICO creates different models for different types of lenders (such as card issuers and auto lenders), and both FICO and VantageScore create different versions of their models.


Additionally, since your credit reports may differ, your scores can depend on the credit-scoring model, version, and the credit report being used as the basis for the score.


However, FICO and VantageScore generally use similar credit-scoring criteria, and the actions that improve one score may help improve all your scores.


What affects your credit scores the most? Payment history and utilization.

Two credit-scoring categories generally have the most substantial influence on your credit scores: your payment history and how much of your credit you use (also known as your utilization rate).


Your payment history is the most important category when it comes to determining credit scores, which makes sense as scores indicate the likelihood that someone will be late making a payment.


Having a variety of accounts with a long history of on-time payments could help your scores, while late payments could lower your scores.


Late payments are recorded based on how late you were (30-, 60-, 90-, 120-days late, etc.), and the negative impact of a late payment can increase the further behind you fall. If a creditor charges off your account or sends it to collections, that could also hurt your scores.


In addition to the account-specific derogatory marks (a general name for marks on your credit reports that can hurt scores), public records, such as a bankruptcy, may also fall into the payment history category and lower your scores.


The second-most important category is how much you currently owe on your accounts. In part, this has to do with your remaining debt on installment loans and how many accounts you have with a balance. However, much of this category depends on how much of your overall credit limits on revolving accounts (e.g., credit cards and lines of credit) you’re using.


The ratio of your current debt to credit limit is known as your utilization rate. For example, if you have a $250 balance on a credit card with a $1,000 credit limit, your utilization rate is 25 percent. By adding up all your balances and credit limits on revolving accounts, you can find your overall utilization rate, which is generally more important than the utilization rate on any single account.


There’s no precise tipping point, but a lower utilization rate is often best for your scores.


Some credit-scoring models only consider your most recently reported utilization rate, so paying down your accounts could quickly increase those scores. However, others look at your history with revolving accounts and trends in your utilization rate, so consistently keeping a low balance could be important.


What else affects your credit scores?

Payment history and utilization rates are the most significant factors, but many other things can impact credit scores. These include:


  • Whether you’ve used various types of credit, such as an installment loan and revolving credit account. Have a mix of account types could help your scores.
  • How long you’ve had credit for and the average age of all your accounts. A longer history is generally better for scores.
  • If you’ve recently opened new credit accounts, which may hurt your score.
  • If you recently applied for a new account. Even if you didn’t get approved, the application could lead to a hard inquiry which may hurt your score a little.


In short, if you make sure you make at least minimum payments on time, keep your account balances low, and only apply for new credit accounts when you need them, you may get into the good-to-excellent credit score ranges over time.


The RISE Credit Score Plus program

If you want to check one of your credit scores for free, you can sign up for the RISE Credit Score Plus program. It will give you access to your TransUnion® New Account, a credit score developed by TransUnion® and based on your TransUnion® credit report.


While the score may be different than a FICO or VantageScore credit score, it can give you a sense of where you’re currently at, and you can monitor the score for free to see if your credit is improving over time.

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