Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
Professional Debt Relief Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
Qualify For Debt Relief
Professional Debt Relief Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
United Settlement » The Most Important Credit Score Factors
marcel May 13, 2019

The Most Important Credit Score Factors

Building and maintaining a strong credit score is important for a number of reasons. As we progress through adulthood, our borrowing needs tend to intensify – for instance, a recent college graduate isn’t likely to immediately pursue a home mortgage following graduation, though pursuing a low-limit unsecured credit card at that time is quite likely.

However, as the years go by, it becomes far more probable that an individual who has been developing a credit history (through responsible repayment of unsecured credit card debt, among other things) very well may pursue a home mortgage or auto loan. Gaining access to these “larger-ticket” loans becomes more important with time, and a strong credit score helps facilitate the borrowing process and makes life easier.

Therefore, it is important to understand what exactly goes into formulating a credit score – what are the most important credit score factors? Let’s take a closer look.

Payment History

The single most important contributing factor to a credit score is an individual’s payment history. Whenever someone is looking to establish or strengthen credit, it’s absolutely essential to establish a track record of consistent monthly payments. This only makes sense.

When a potential creditor is faced with a lending decision, that creditor seek a reliable debtor – someone who can be counted on to pay back the money owed. For this reason, FICO credit scores assign a 35% weighting to an individual’s track record of repayment while penalizing for late and missed payments, taking into account the frequency and recency of both.

The easiest way to make this contributing factor work for you? Pay your bills on time each month – no exceptions. It may sound surprising, but just one missed payment can impact a credit score by as much as fifty points.

Credit Utilization Ratio

Running a close second to payment history is credit utilization ratio, which is the overall percentage of total available credit that is actually indebted. For example, someone holding a credit card with a $10,000 credit line and an outstanding balance of $1,500 demonstrates a 15% credit utilization ratio on that specific account.

If that account is the only debt instrument in an individual’s credit profile, the overall credit utilization ratio is 15%. However, except for those individuals who are just getting started with the process of establishing and building credit, most people have more than one potential source of borrowing.

Therefore, there are two levers to consider when thinking about credit utilization ratio – the total amount of all credit lines available from credit cards, installment loans, as well as a home mortgage and/or auto loan – and the total amount of indebtedness. A lower credit utilization ratio is better – somewhere under 30% in considered favorable.

Higher than that and the credit score starts to take a hit –  as the credit utilization ratio is a 30% contributing factor toward a FICO credit score.

The Two Most Important Credit Score Factors

If we were to just stop here, it’s important to realize that payment history and credit utilization ratio are the two most important credit score factors, and that together they contribute approximately 65% toward the formulation of a FICO credit score.

Perform poorly on either of these and your chances of an excellent FICO score in the 700s or higher become severely compromised. However, the reverse is also true. Make consistent timely payments while keeping your credit lines open and your balances at a minimum and you’ll be well on your way to a strong credit score.

However, there are a few more credit score factors to be aware of that can seal the deal toward a strong credit score.

Length of Credit History

The third most important credit score factor is length of credit history, which can be assessed as the average age of existing accounts. This is important to potential lenders because the longer the credit history, the greater the amount of information related to repayment and general financial behavior that can be relied upon.

Accordingly, it is wise to keep older accounts open, even when they haven’t been utilized for some time. The benefits here are actually twofold – maintaining old accounts that aren’t active also keeps the aggregate available credit higher, thereby lowering the credit utilization ratio while keeping the average age of accounts higher.

In contrast, it can hurt a credit score to close an old account in favor of a newer one, as this will shorten the credit history length. If the new account has favorable features that the older one lacks, keep the old account open and preserve your credit history length, which is a contributing factor to the tune of 15% of an overall credit score.

Diversification and Recent Credit Inquiries

The final two credit score factors each check in at 10% apiece – diversification and the frequency/amount of recent credit inquiries. While neither of these will make or break a credit score outright, they each are eligible to serve as icing on the cake for a strong credit score.

As a general rule, lenders like to see borrowing behavior that includes a variety of debt that is paid back in a timely manner – credit cards, an auto loan, personal installment loan, home mortgage, student loans, etc.

The greater the diversification, the better. Meantime, when an individual applies for credit, potential lenders perform a “hard pull” of a credit report, and this gets reported to the credit bureaus.

When an abundance of new credit is opened within a short period of time, it looks bad to lenders because it can imply desperation. FICO will look at the frequency of hard pulls over the previous twelve months and factor this into its calculation of a credit score.

Some good news – multiple inquiries related to an auto loan or mortgage are generally treated as one inquiry, since it is considered advisable to shop around for the best loan.

Additionally, when the search for the right loan is successful, available credit goes up causing the credit utilization ratio to drop, and this offsets any negative impact to the credit score from the inquiry.

Excellent

Based on 356 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Buddy Ewing

December 28

Time and again, I did not know how to handle my debt

Time and again, I did not know how to handle my debt. Even when I paid my credit cards off, a few months later I was back in the same situation. But this year is different. I contacted United Settlement...

Lianne Finnegan

December 27

Business debt relief is what I needed when I contacted the United Settlement crew

Business debt relief is what I needed when I contacted the United Settlement crew. They are committed to helping people like me who requires more help with business debt problems. I had several loans out...

Wren Herrera

December 26

Student loan debt was the reason that I reached out to United Settlement

Student loan debt was the reason that I reached out to United Settlement. I had about 200K plus in student loan debt for my business degree. I recognized that I had to do something when I struggled to make...

Jardel Shah

December 20

There is nothing worse than falling ill and then having to deal with super expensive medical bills

There is nothing worse than falling ill and then having to deal with super expensive medical bills that you really do not have the patience or experience to handle. I was pleased with my experience with...

Iain Holt

December 14

I took out a few personal credit cards to open my boutique

I took out a few personal credit cards to open my boutique. When than money ran out, I went on to take out more loans for my business. However, this quickly turned into a disaster. Today, I now have a mountain...

Avaya Adkins

December 12

Who knew that auto loans were so negative for your credit lines

Who knew that auto loans were so negative for your credit lines? Especially, if they are not paid off right away. As a married couple, we had vowed to keep auto loan debt at bay. But, we found ourselves...

Lucien Rojas

December 07

I didn’t have a ton of debt when I contacted United Settlement

I didn’t have a ton of debt when I contacted United Settlement, but what I wanted from them was some information about how to handle my debt management. I knew that I needed some more information to get...

Madiha Matthams

December 04

Federal student loans were the reason I ended up at United Settlement

Federal student loans were the reason I ended up at United Settlement. I had about $200K to pay back and I was not quite sure where to tackle that debt once I got out of school. But I reached out to that...

Asim Horner

December 03

Everyone knows how horrible student loans are

Everyone knows how horrible student loans are. For me and my family, they had become more than just an annoying monthly bill. They had taken over our lives. That’s why I decided to take action and find...

Frankie Mckee

December 03

I wanted to be more informed about my own personal and business debt

The number one reason I chose to contact United Settlement was I wanted to be more informed about my own personal and business debt. When you have credit card debt, it can be extremely frustrating. Especially...

Justine O'Ryan

November 29

I cannot believe I was finally able to find a company to actually help me pay off my debt

I cannot believe I was finally able to find a company to actually help me pay off my debt! I thought I would forever be chained to debt. But United Settlement offered me multiple solutions for paying off...

Jerry Conley

November 21

What your money can do for you.

The great reviews that you have thanks.

Cathal Brett

November 19

Dealing with high interest auto loan debt was difficult for me and my wife

Dealing with high interest auto loan debt was difficult for me and my wife. We thought we got a good deal, but it actually was a horrible loan. So, we reached out to United Settlement, and they got to work...

Aliesha Ward

November 12

No one really wants to go bankrupt, and neither did my family

No one really wants to go bankrupt, and neither did my family. But fortunately, we did not have to go that route. It was our last resort, but United Settlement helped us figure out a way around bankruptcy...

Filip Rosas

November 08

I had been through about 5 different credit counseling agencies before I found United Settlement

I had been through about 5 different credit counseling agencies before I found United Settlement. I had read through their reviews and made the decision to move forward with them. I also was so impressed...

Susanna Fasenmyer

November 07

Save time and money

Just what I needed, already had a company I was working with and I switched because I was able to same some money. Brian and Alfred were really nice and helpful

Warren Hutchinson

November 07

As a business facing some unwanted financial difficulties

As a business facing some unwanted financial difficulties, we were at a loss for what to do next when our debt started to soar. We took a closer look at our financial situation by contacting United Settlement....

Bobbi O'Quinn

November 02

I had no clue how to create a debt management plan

I had no clue how to create a debt management plan and in fact, I didn't even know what a debt management plan was. Fortunately, I reached out to United Settlement before I had too much debt to tackle....

Dawn Mercer

October 31

Being burdened by debt is one of the biggest struggles we faced as a family

Being burdened by debt is one of the biggest struggles we faced as a family. But these people at United Settlement were very helpful in deciphering the different debts we had and then coming up with a debt...

Forrest Guest

October 29

Student loan debt was my worst enemy before I ran into United Settlement

Student loan debt was my worst enemy before I ran into United Settlement. I really thought I would just have terrible credit for the rest of my life because I will never get out from underneath it. It was...

Are you in debt? we can help

  • Amount
  • Contact

How much do you owe?

Related:

  • Debt Settlement
  • Tax Debt Relief
  • Can You Negotiate Your Own Debt
  • Debt Consolidation
  • Debt Management
  • Contact Us
  • 241 West 30th Street
    3rd Floor
    New York, NY 10001
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 30% including fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us.
    Copyright 2020. United Debt Settlement, LLC