Your FICO score — the credit score used by most lenders — is calculated from five factors. The weights are fixed, which means you can predict exactly which actions move your score and by how much. Most advice about credit improvement focuses on the wrong things; here's what actually matters.
The Five Factors and Their Weights
2. Credit utilisation (30%): How much of your available credit are you using? Below 10% is ideal; below 30% is acceptable. This factor changes quickly when balances change.
3. Length of credit history (15%): Average age of accounts and age of oldest account. Closing old accounts hurts; opening many new accounts hurts.
4. Credit mix (10%): Do you have a variety of credit types — revolving (credit cards) and installment (auto loan, mortgage)? Minor factor; don't open accounts just for this.
5. New credit (10%): Recent hard inquiries and recently opened accounts. Each hard inquiry costs ~5 points, recovery in 3–6 months.
The Highest-Leverage Actions
Pay every bill on time, every time. This is non-negotiable. Set up autopay for minimums on every account. Even if you pay in full later, the autopay minimum prevents a missed payment from damaging your score.
Reduce credit utilisation to below 10%. If you have a $10,000 credit limit and carry a $4,000 balance, your utilisation is 40% — significantly damaging your score. Pay it down to below $1,000 and your score can rise 20–50 points within one billing cycle after the new balance is reported.
Common Myths
Myth: Checking your own credit score hurts it. False. Soft inquiries (checking your own score) do not affect FICO scores. Only hard inquiries (from lenders when you apply for credit) have a minor impact.
Myth: Carrying a small balance helps your score. False. You do not need to carry a balance to demonstrate credit usage. Paying in full every month is optimal — zero interest paid, and your utilisation is still reported at whatever your statement balance was.
Myth: Closing old credit cards improves your score. Usually false. Closing a card reduces your total available credit (raising utilisation) and can lower your average account age. Keep old cards open and occasionally use them for small purchases.
Before Applying for a Mortgage
Aim to maximise your score in the 6–12 months before applying. Key steps: pay down revolving balances aggressively, avoid opening new credit accounts, and don't close existing accounts. Rate shopping for mortgages within a 45-day window counts as one hard inquiry under FICO scoring — don't be afraid to shop multiple lenders.