Have you ever found yourself wondering how your credit score is determined or which factors influence it the most? If so, you’re not alone. Credit scores can be a bit of a mystery, but understanding how they’re calculated can give you a better sense of where you stand financially and how you can improve your score. Let’s break down the key components that go into calculating your credit score and offer some insight into how your financial habits impact this important number.

1. Payment History (35%)

The most significant factor in determining your credit score is your payment history. Lenders want to see that you’re reliable and capable of paying back borrowed money. Your payment history makes up about 35% of your credit score and includes all your debt payments—whether on credit cards, car loans, or other types of credit. The more positive payment history you have, the better your credit score will be. On the flip side, missed payments, defaults, bankruptcies, and collections can have a major negative impact on your score.

2. Amounts Owed (30%)

The amount of debt you carry also plays a major role in your credit score. This accounts for 30% of your score. The key factors here are how much you owe on credit cards, loans, and lines of credit, and your credit utilization ratio—how much of your available credit you are using. For example, if you’re using a large portion of your credit limit, say 75% or more, this can signal to lenders that you may be struggling financially, which can hurt your score. Keeping your credit utilization under 30% is typically considered a healthy practice.

3. Length of Credit History (15%)

The longer your credit history, the more reliable your score is in predicting how well you manage credit. This factor makes up 15% of your overall score. Creditors like to see that you’ve had a long history of using credit responsibly. If you have a relatively new credit history, it might be harder to build a strong score quickly. If you’ve been using credit for years without any issues, this will work in your favor.

4. New Credit (10%)

Opening new credit accounts and making frequent inquiries can negatively impact your credit score. New credit accounts for 10% of your overall score. When you apply for a new credit card or loan, the lender will perform a hard inquiry, which can cause a slight dip in your score. Additionally, opening several accounts in a short period of time might signal financial instability to creditors. It’s best to only open new credit when necessary and be mindful of how many applications you submit.

5. Types of Credit Used (10%)

Finally, the types of credit you have—credit cards, mortgages, auto loans, and others—account for 10% of your credit score. Lenders like to see that you can manage a mix of credit types, as it shows you’re responsible with different forms of borrowing. However, it’s important to note that this factor isn’t as significant as others. You shouldn’t go out of your way to apply for new types of credit just to improve this part of your score. Simply maintaining a healthy mix of credit, as needed, will help this component.

Other Factors

While these five factors are the primary components of your credit score, it’s important to remember that not all scoring models work the same way. Different types of credit histories or recent credit activity may cause slight variations in how these factors are weighted. Additionally, some models may factor in elements such as income, assets, or employment status when assessing your ability to repay credit.

If you want to know your current credit score, you can request it from major credit bureaus like Equifax or TransUnion. Keep in mind that there’s usually a fee for this. Alternatively, you can use free online tools to estimate your score based on the information in your credit report.

By understanding the factors that go into calculating your credit score, you can take steps to improve your financial habits and work towards a better score. Regularly paying your bills on time, keeping your debt low, and using a variety of credit types responsibly are all key actions that will help boost your credit score over time.