Compare
| FICO Factor | Weight | What Helps | What Hurts |
|---|---|---|---|
| Payment History | 35% | Every on-time payment, including minimum payments | A single 30-day late payment; collections; charge-offs |
| Credit Utilization | 30% | Balances well below 30% of each card's limit (under 10% for top scores) | Carrying a high balance even if you pay in full — the snapshot captures statement-date balance |
| Length of Credit History | 15% | Long average account age; oldest account age | Closing old cards reduces average age; opening many new accounts also lowers average age |
| Credit Mix | 10% | Both revolving (credit cards) and installment (auto loan, student loan) accounts | Only one type of credit; no installment history |
| New Credit | 10% | Minimal recent hard inquiries; no cluster of new accounts | Multiple hard inquiries in a short window; opening several cards at once |
Key point
The snapshot day matters. Your utilization ratio is calculated from your statement-closing balance — not whether you paid the bill. If your card has a $10,000 limit and you charged $7,000 this month (even planning to pay it in full), the bureau reports 70% utilization on the day the statement closes. To show low utilization, pay down the balance before the statement closing date, not just by the payment due date.
Key insight
Note
People mix these up constantly, and the gap between them is enormous.
Authorized user: you get a card on someone else's account and can spend on it, but you are NOT legally responsible for the debt. If the bill goes unpaid, the law can't make you pay it — you can simply ask to be removed and the account drops off your report. It's low-risk for the authorized user.
Co-signer: you sign the loan or lease alongside the main borrower and become jointly and severally liable — a legal phrase that means the lender can collect the ENTIRE debt from you, not just half, the moment the other person stops paying. Co-signing a friend's $25,000 car loan means that if they default, you owe the full $25,000, it lands on YOUR credit report as a missed payment, and the lender can sue you for it. The loan also counts against your own debt-to-income ratio, which can block you from qualifying for your own mortgage. Co-signing is not a favor like 'putting in a good word' — it is taking on someone else's entire debt with none of the benefit. Say yes only if you would be willing and able to pay the whole thing yourself.
Note
If you find an error on your report — a late payment that was actually on time, an account that isn't yours, a balance that's wrong — federal law is on your side. Under Section 611 of the Fair Credit Reporting Act (FCRA §611), once you formally dispute an item, the credit bureau must investigate it, usually within 30 days. If they can't verify the item is accurate within that window, they must remove it. The dispute is free and you do not need to pay a 'credit repair' company to do it for you.
Three ways to file, weakest to strongest:
- Online (each bureau's website): fastest and easiest, but you typically have to accept the bureau's terms, and you get the least documentation. Fine for a simple, obvious error.
- Certified mail with return receipt (the strongest method): mail your dispute letter to the bureau with copies (never originals) of your supporting documents. The certified-mail receipt time-stamps the start of the 30-day clock and gives you legal proof the bureau received it — which matters if the error persists and you ever need to escalate. This is the method consumer advocates recommend for anything serious or recurring.
- Phone: convenient but leaves the weakest paper trail; avoid it for disputes that matter.
Whatever method you choose, be specific: name the exact item, state why it's wrong, and attach proof. Vague 'this is incorrect' disputes get rejected. After the bureau corrects an item with one bureau, check the other two — errors often appear on all three.
Key point
Do not close old credit cards. Many people close cards they no longer use, thinking it looks cleaner. It does the opposite: (1) it reduces your total available credit, raising utilization on other cards; (2) it lowers your average account age and eliminates your oldest account's contribution to length-of-history. Keep old cards open with a small recurring charge (e.g., a $5 streaming subscription) to prevent the issuer from closing them for inactivity.
Formula
Utilization Ratio = Total Balances / Total Credit Limits (across all revolving accounts)
Key point
Hard inquiries vs. soft inquiries: only hard inquiries affect your score. Hard inquiries happen when you apply for new credit (credit card, auto loan, mortgage). Soft inquiries — checking your own credit, employer background checks, pre-qualification offers — do not affect your score at all. Rate shopping for a mortgage or auto loan within a 14–45 day window counts as a single inquiry (depending on the scoring model), so do not delay shopping out of inquiry fear.
Note
Most conventional mortgage lenders want to see at least 12 months of clean credit history before approving a prime-rate mortgage. 'Clean' means no 30-day lates, no new derogatory marks, and stable utilization. If you plan to buy a home in the next 12–18 months: (1) do not open new credit cards; (2) do not close old ones; (3) pay every bill on time — one slip can delay your mortgage timeline by months; (4) pay down balances to under 10% utilization on each card before applying.
Key point
FICO scores range from 300 to 850. Lenders typically use score bands: 760+ (best rate tier), 740–759, 720–739, 700–719, 680–699, and below 680 (subprime or denial territory for conforming mortgages). The rate difference between a 760+ score and a 680 score on a $400,000 30-year mortgage can be 0.5–1.0 percentage points — equal to $50,000–$100,000 in additional lifetime interest. Going from 720 to 760 often saves more than going from 680 to 720.
Try it
Check-in
Sit with the ideas.
Your credit report shows: Account A (age 8 years, $5,000 limit, $0 balance, never late), Account B (age 2 years, $3,000 limit, $1,500 balance, never late), Account C (age 6 months, $2,000 limit, $0 balance, opened last month). You are thinking of closing Account A because you never use it. What is the most likely effect on your credit score?