Three digits decide whether you get the apartment, what your car loan costs, sometimes even whether you get the job. And yet nobody hands you the recipe. Here's the strange part: the recipe is public. A credit score isn't a judgment of your character or your salary — it's a formula with five known ingredients and exact weights. Once you know them, the moves that raise (or wreck) a score stop being mysterious.
What a FICO score is
A credit score is a number that predicts one thing: how likely you are to pay borrowed money back on time. The most widely used version is the FICO score, which runs from 300 to 850. Lenders typically read the range like this:
| Score | Rating | What it means in practice |
|---|---|---|
| 300–579 | Poor | Most loans denied, or approved at painful rates |
| 580–669 | Fair | Approvals possible, but expensive |
| 670–739 | Good | Most loans approved at decent rates |
| 740–799 | Very good | Better rates than most applicants |
| 800–850 | Exceptional | Lenders compete for you |
You don't have one score — you have many (FICO has versions, and there's a competitor called VantageScore), but they all rise and fall on the same behaviors. The magic line for most purposes is around 740: above it, you're getting close to the best rates lenders offer. Going from 740 to 840 mostly buys bragging rights.
The five factors (with exact weights)
FICO publishes the weights. This table is the whole game:
| Factor | Weight | What it measures |
|---|---|---|
| Payment history | 35% | Do you pay every bill on time, every time? |
| Amounts owed (utilization) | 30% | How much of your available credit are you using? |
| Length of credit history | 15% | How old are your accounts, on average? |
| Credit mix | 10% | Do you handle different types (cards, loans)? |
| New credit (inquiries) | 10% | Have you applied for a lot of credit recently? |
Notice that the first two factors are 65% of your score, and both are completely within your control this month. The other 35% mostly rewards patience.
Payment history (35%): the one rule that outranks everything
Pay at least the minimum payment on every account, on time, every month. That's it — that's the biggest factor. A payment isn't reported as "late" to the bureaus until it's 30 days past due, but once it is, it can sit on your credit report for up to 7 years (its sting fades long before that — more in lesson 3). Set up autopay for at least the minimum on every card and loan you have, today. It's the single highest-value five minutes in personal finance.
Amounts owed (30%): utilization, explained properly
Credit utilization is the percentage of your credit limit you're using, measured on both levels:
- Per card: a $300 balance on a card with a $1,000 limit = 30% utilization on that card.
- Overall: all your balances divided by all your limits combined.
The classic guideline is to stay under 30% — but that's a cliff edge, not a target. Scores keep improving as utilization drops, and people with exceptional scores typically run under 10% (so under $100 of balance per $1,000 of limit). High utilization signals to the formula that you're leaning on credit to get by, even if you pay in full.
Three things most people get wrong about utilization:
- It's measured from your statement balance, usually whatever the card reports on its statement date — not whether you pay in full. You can pay in full every month and still show 90% utilization if you charge a lot before the statement closes.
- One maxed-out card hurts even if your overall number is fine. A $450 balance on a $500-limit card is 90% on that card — damaging — even if you also have a $4,000-limit card sitting empty (overall utilization: just 10%).
- Utilization has no memory. Unlike late payments, last month's high balance doesn't haunt you. The moment a low balance is reported, the score recovers. This makes high utilization the most fixable score problem there is.
Length of history (15%): why closing an old card can hurt
This factor looks at the age of your oldest account and the average age of all accounts. Two consequences:
- Time is on your side. A card you opened at 19 quietly works for you forever.
- Closing your oldest card can hurt twice. You lose its credit limit (so your overall utilization jumps), and eventually its age. If an old card has no annual fee, the standard move is to keep it open with one tiny recurring charge on autopay rather than closing it.
Credit mix (10%) and new credit (10%)
Credit mix rewards handling different types of credit — revolving (credit cards) and installment (car loans, student loans, any loan with fixed payments). Don't take out a loan just for mix; it's only 10%.
New credit is about inquiries. A hard inquiry happens when a lender pulls your report because you applied for credit — it typically dings your score about 5–10 points and fades within a year. A soft inquiry (checking your own score, pre-approval offers, employer checks) never affects your score at all. Check your own credit as often as you like. The thing to avoid is a burst of applications: five new credit cards in three months looks, to the formula, like someone scrambling for cash.
What hurts more: a missed payment or a high balance?
Ready to actually get a score in the first place? That's lesson 2: building credit from zero. Terms like utilization, hard inquiry, and revolving credit also live in the glossary.