The Anatomy of a Credit Score

What makes up a credit score?

Credit scores are the most popular mysteries. We know they’re important and we know that we all have one. Furthermore, people and organizations who are not lenders that we interact with (landlords, insurance companies, employers) are placing increase value on the credit score as they evaluate us in all aspect of our lives, making it some type of character evaluation tool. But most of the time, we don’t know the most important thing we should know about our credit score: what it consists of, what influences it. Below, you’ll see a graph of your credit score and a written breakdown of the various components.


  1. Payment History – 35%: For obvious reasons, this is the most important and largest component of your credit score. It tells anyone who reviews your credit report how likely you are to pay your debts based on your payment history. Are you chronically late? Do you have 7 accounts in collection? Are you consistently on time? Lenders want their payments on time every time. That is the most important thing when anyone gives you a loan. Both parties agree on a payment date and the lender is counting on getting that money on the date specified.
    • How it affects your score: If you don’t have a good history of making payments, that is the biggest risk for a lender and report reflects that poor history, your score will suffer.
  2. Amount of Debts – 30%: This one is a little tricky. While it tells the story of how much debt you have outstanding, all debts are not equally weighted in this category. Revolving lines of credit impact that area more than an installment loan would. This is because the principal balance of an installment loan can only go down while a revolving line tells them how likely you are to borrow up to or close to your limit. To a lender, anyone who continually maxes out a card or gets close to doing so is someone who is not able to manage their debt responsibly.
    • How it affects your score: Maxing out your cards or even using more than 30% of your credit line will negatively affect you.
  3. Length of Credit History – 15%: This one is pretty intuitive. It’s much harder to “fake the funk” over a long period of time. If you’ve had a credit card for 10 months, it’s much easier to have a positive history. However, if you’ve had it for 10 years, chances are you have gone through some major changes both positive and negative and you have managed your finances a certain way throughout it all. Creditors can best evaluate your long-term financial behavior when you’re past the honeymoon phase.
    • How it affects your score:  The older your accounts are, the better your score.
  4. New Credit – 10%: This component tells creditors if you’re out here seeking to borrow money from anyone who will lend it to you. It also give them an idea if you’ve been denied by other lenders as they can see when you had an inquiry but no new account has been reported opened.
    • How it affects your score: The more new inquiries you have on your report, the lower your score.
  5. Other Factors/Types of Credit – 10%: This is the variety or diversity of credit you use and how well you manage them all. If you only have student loans, it doesn’t mean that you won’t have a good score but your score may not be as high as someone with a variety of credit types, all else being equal. However, it is not very heavily weighted and there are enough points in the other categories to allow younger borrowers to still have an excellent score.
    • How it affects your score: The most varied your credit types, the more experience it shows you have managing different types of lenders and credits.

Now that you know the anatomy of a credit score, hopefully you have all the necessary tools to heal it.

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