5 Factors That Determine Your Credit Score

Paul FennerPersonal Finance


Recently I was sitting down with a new client who just graduated from college and we began to cover the basic tenants of what a financial plan would look like for this young lady.  Mind you this young woman only took on a reasonable amount of student loan debt, had no credit card debt, and actually had a material amount in a savings account as an emergency fund.

To me, this was quite impressive given that she is only 22.  Hats off to her parents who had a big hand in raising a responsible daughter.

My meetings with this client got me to thinking that as many households have worked vigorously to rebuild their credit history and pay down debt over the past 6 years since the great recession, that it would be a good time to review just what goes into the makeup of one’s credit score.

This Business insider article does a really job of laying out the key elements that form the basis of your credit score

  1. Amount of balances owed: ~35%
  2. Payment history: ~35%
  3. Length of credit history: ~15%
  4. Credit mix: ~10%
  5. New credit: ~10%

Bottom line your credit is really determined by how much debt you carry and how often you pay on time!

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