Credit scores, explained by the five things that move them

A FICO score is not a mystery. It is five inputs, each with a fixed weight, run through the same model the credit bureaus license. Two of those inputs decide 65 percent of the number. If you handle those two well, the other three mostly take care of themselves. So forget the myths about carrying a balance or checking your own score. Here is the actual recipe and what to do with it.

The five factors and their weights

FICO publishes the categories. The exact math is proprietary, and the weight on any single factor shifts a little depending on how thin or thick your file is. But for almost everyone, these are the percentages that matter.

Payment history at 35 percent and amounts owed at 30 percent are the big two. That is 65 percent of your score riding on two things you control every month: paying on time and not carrying a big balance relative to your limits. The other 35 percent comes mostly from time and patience. You cannot rush the age of your accounts, and you do not need to.

Utilization: the lever you can pull this week

Utilization is the share of your available credit you are using. Add up your balances, divide by your total limits, and that is the ratio FICO looks at. It reads both your overall number and the ratio on each individual card. The model rewards low. A common rule is to keep it under 30 percent. The scores reserved for the best rates usually come from people sitting under 10 percent.

Walk the arithmetic. Say you have one card with a $2,000 limit.

• Statement balance of $1,200 reports a 60 percent utilization. That looks maxed out and drags the 30 percent slice of your score down hard.
• Pay it down so $580 reports. That is 29 percent, just under the common threshold. Better, but still mid-tier.
• Get the reported balance under $200 and you are below 10 percent. That is where the utilization factor stops costing you points.

The timing trick most people miss: the bureau sees the balance on your statement closing date, not your due date. You can use the card all month, then pay it down to a small balance before the statement closes. A low number reports, your utilization looks great, and you still pay zero interest because you cleared the rest by the due date. Carrying a balance does not help your score. It just costs you interest.

Payment history: one slip is expensive

Payment history is the single heaviest factor, and the penalty for getting it wrong is brutal. A creditor reports an account as late once you are 30 days past due. A single missed payment can knock 50 to 100 points off an otherwise good score, and the higher your score was, the further it falls. Someone at 780 has more to lose than someone at 650.

Then it lingers. A late payment stays on your credit report for up to seven years. Its weight fades over time, so a slip from four years ago hurts less than one from last month, but it sits there as a black mark the whole time. The takeaway is plain: automate at least the minimum payment on every account so a busy month never turns into a reported late. Pay the full balance manually on top of that when you can.

Starting from zero

You cannot have a payment history without an account to pay. If you have no credit file yet, you have two reliable on-ramps.

1. A secured credit card. You put down a refundable deposit, often $200 to $500, and that deposit becomes your credit limit. The card reports to all three bureaus exactly like a normal card. Use it for one small recurring charge, pay it in full each month, and after six months to a year many issuers refund the deposit and graduate you to a regular card.
2. Becoming an authorized user. A parent or trusted relative adds you to a card they already manage well. Their account history can report on your file, which can give you an instant length of history and a low utilization you did not have to build. Confirm the issuer reports authorized users to the bureaus first, and only do this with someone whose habits you trust, because their mistakes can land on your report too.

Either way, the work is the same once the account exists. Pay on time, keep the reported balance low, and let the account age. On-time payments plus low utilization do most of the work. You do not need to chase a credit mix or open a pile of accounts to look responsible.

What the smaller factors actually want

Length of history at 15 percent rewards old accounts and a higher average age, which is the main reason you keep your first card open even after you get better ones. Closing your oldest card shortens your average age and can lower your total limit, which raises utilization. Credit mix at 10 percent gives a small bump for showing you can manage both revolving accounts (cards) and installment loans (a car or student loan), but it is not worth taking on a loan you do not need. New credit at 10 percent covers recent applications and hard inquiries. Apply for a few cards in a short window and the model reads it as stress.

FAQ

How do I build credit from nothing?

Open one account that reports to the bureaus. A secured card is the most common choice: deposit $200 to $500, charge one small bill to it each month, and pay the statement in full. Or have a relative add you as an authorized user on a card they pay on time. Use the account, keep the reported balance low, and a score usually appears within three to six months.

Do soft inquiries hurt my score?

No. A soft inquiry happens when you check your own score, when a lender prescreens you for an offer, or when an employer runs a background check. Soft pulls are invisible to the model and never cost you points, so check your own credit as often as you like. A hard inquiry is different. It happens when you formally apply for new credit, it shows on your report for about two years, and it shaves a few points for several months. Rate-shopping for one loan, like a mortgage or auto loan, inside a short window usually counts as a single inquiry, so comparison shopping does not stack up.

How fast can a score improve?

Utilization moves fastest. Pay a high balance down before the statement closes and the new, lower number can lift your score within one billing cycle, roughly 30 to 45 days. Adding positive payment history and aging your accounts is slower and compounds over months and years. The damage from a missed payment fades gradually rather than vanishing, so the best speed play is the one you make before anything goes wrong: low utilization and on-time payments, every month.

Will closing a card help my score?

Usually not. Closing a card removes its limit from your total available credit, which pushes your utilization up, and over time it can shorten your average account age. If a card has no annual fee, the simpler move is to keep it open with a small recurring charge so it stays active. Closing only makes sense when an annual fee is not worth paying for a card you no longer use.