Credit Scores Explained

1. The five factors that make your score

FICO scores come from five inputs, and two of them do most of the work. Learn the weights and the whole system stops being a mystery.

• Payment history (35%): did you pay on time, every time. One 30-day late mark can sting for years. Autopay the minimum on every card and this factor takes care of itself.
• Utilization (30%): how much of your credit limits you are using. Lower is better. This factor has no memory, so it resets the moment your balances drop. Our utilization guide covers it in depth.
• Age of credit (15%): the average age of your accounts and the age of your oldest one. Keep old no-fee cards open forever.
• Credit mix (10%): having both revolving accounts (cards) and installment loans (auto, mortgage, student). Do not take out a loan just for this. It is the smallest lever.
• New credit (10%): recent hard inquiries and newly opened accounts. This is the only factor card applications touch directly, and it is one of the two smallest.

2. The score bands

FICO runs from 300 to 850. Lenders read it in bands, not exact numbers.

• 800 to 850: exceptional. Approvals are near automatic.
• 740 to 799: very good. The best card offers live here.
• 670 to 739: good. Most cards are in reach, premium cards get picky.
• 580 to 669: fair. Start with starter cards and rebuild.
• 300 to 579: poor. Secured cards and on-time payments are the path out.

Moving from 745 to 780 changes almost nothing. Moving from 660 to 700 changes a lot. Optimize the band you are in, not the number.

3. What a card application actually does

Each application triggers a hard pull, which costs about 5 points and falls off your score in 12 months. That is the whole penalty. The new account then lowers your average age a bit, but it also adds credit limit, which lowers utilization. Within a few months most people land at or above where they started. The fear that applying for a card wrecks your credit does not survive contact with the math.

4. Why churners often have 750+ scores

People who open cards regularly tend to have excellent credit, and it is not luck. They pay in full every month, which maxes the 35% factor. They hold many cards with high combined limits, which crushes the 30% utilization factor. Their oldest accounts stay open and keep aging. The small, temporary dings from inquiries are noise next to the two big factors working in their favor. Played correctly, this hobby builds credit.

5. Myths that refuse to die

• Checking your own score lowers it. False. Self-checks are soft pulls and cost nothing.
• Carrying a balance helps your score. False. It only helps the bank collect interest.
• Closing a card always helps. False. It cuts your limit, raises utilization, and can hurt.
• You have one score. False. You have dozens of versions across bureaus and models.
• Income affects your score. False. Income matters for approvals, not for the score itself.