Credit Score Guide: How It's Calculated and How to Improve It

How FICO Scores Are Calculated

• Payment history (35%): The biggest factor. Any missed or late payment (30+ days) can drop scores 50–100 points. On-time payments are the foundation.
• Credit utilization (30%): Amount owed ÷ Total credit limit. Keep below 30%; ideally below 10% for maximum score. Paying down balances is the fastest way to improve scores.
• Length of credit history (15%): Average age of all accounts. Don't close old accounts — it reduces average age and total credit limit.
• Credit mix (10%): Having both revolving (credit cards) and installment (loans, mortgages) accounts helps modestly.
• New credit (10%): Hard inquiries (loan applications) temporarily reduce scores by 5–10 points. Multiple inquiries within 14–45 days for the same loan type count as one inquiry.

Credit Score Ranges

• 800–850: Exceptional — best rates on everything
• 740–799: Very Good — near-best rates
• 670–739: Good — average consumer
• 580–669: Fair — higher rates, some restrictions
• Under 580: Poor — limited credit access

Fastest Ways to Improve Your Score

1. Pay down credit card balances below 10% utilization — fastest impact (1–2 billing cycles)
2. Dispute inaccurate negative items (errors affect 25%+ of reports)
3. Become an authorized user on someone else's old account with low utilization
4. Never miss a payment going forward — time heals most credit damage