This article was originally published on September 3, 2024, and was updated as of August 25, 2025 to reflect timely credit information.
Key takeaways about your credit score:
- Payment history and credit utilization are the two most important credit score factors.
- Avoid quicksand moves like closing old cards, maxing out limits, or stacking applications.
- Keep utilization under 30% – under 10% if you’re prepping for financing.
- Review your reports regularly and fix errors.
- Work with nonprofit credit counselors to accelerate progress and become loan-ready.
If you’ve ever applied for a mortgage, a car loan, or even a credit card, you’ve seen how everything can hinge on a three-digit number. Your credit score determines whether doors open with favorable terms – or slam shut.
Understanding how credit scores work is the foundation of smart borrowing. In this guide, we’ll explore what makes your score move, the habits that help, and the mistakes that hold you back.
“What is a credit score?”
A credit score is a numerical prediction of how likely you are to repay borrowed money. Lenders use it to decide:
- Should they approve you?
- What interest rate should they charge?
- How much credit should they extend?
The most common system is the FICO score, which ranges from 300 to 850. Higher scores equal stronger approvals and lower borrowing costs.
How credit scores are calculated
Your score is a weighted average of five main factors. Knowing these – and their weights – is the heart of understanding how credit scores work:
- Payment History (35%)
- Credit Utilization (30%)
- Length of Credit History (15%)
- Credit Mix (10%)
- New Credit Inquiries (10%)
Now, let’s explore the actions that can either give your credit score a boost or drag it down.
How to raise your credit score?
- Pay every bill on time: Nothing matters more than on-time payments. Even one 30-day late mark can hurt for years. Since payment history accounts for 35% of your score, consistently paying bills when they’re due can have a huge positive impact. Pro tip: Set up automatic payments or calendar reminders to ensure you never miss a due date. Even one late payment can cause your score to drop significantly, so staying on top of your payments is a must.
- Lower your credit utilization: Credit utilization, or the percentage of your credit limit that you’re using, is the second-largest factor affecting your credit score. Ideally, you want to keep your credit utilization below 30%. Pro tip: If possible, pay down your balances multiple times a month, not just when your bill is due. This can help keep your utilization low and your credit score high.
- Keep old accounts open: The length of your credit history also plays a role in your credit score. Closing a card shortens your credit history and raises utilization. Pro tip: If you’re concerned about the temptation to make unnecessary purchases, shred the card but leave the account open. This way, you maintain the account’s age without risking overspending.
- Diversify your credit mix: Having both revolving (cards) and installment (auto, mortgage, student) shows responsibility. This shows lenders that you can manage different types of credit responsibly. Pro tip: While it’s not advisable to take on unnecessary debt just to improve your credit mix, if you’re in the market for a new loan, it could be beneficial to consider a different type of credit product than you’ve used previously.
- Review and dispute credit report errors: Mistakes happen, and sometimes they happen on your credit report. Regularly reviewing your credit report can help you spot any errors or fraudulent activities that could be dragging down your score. You’re entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) every year. Pro tip: If you find an error, dispute it with the credit bureaus immediately. Ideally, you should enlist the services of a certified credit counselor on our platform to ensure you get the results you want. Correcting mistakes on your credit report can give your score an instant boost.
Even a single missed payment can lower your credit score, and the damage can last for years.
What lowers your credit score?
- Missing payments. Payment history is 35% of your score. Even one miss hurts. Even a single missed payment can lower your credit score, and the damage can last for years. Pro tip: If you’re unable to make a payment, contact your lender right away. They might offer hardship options that can help you avoid a negative report to the credit bureaus.
- Maxing out credit cards: Spending to the top end of your credit card limits can be a red flag to lenders, suggesting that you’re overextended and may struggle to repay debts. If your credit utilization ratio climbs above 30%, your credit score could take a hit. Pro tip: If you’re close to maxing out your credit cards, prioritize paying them down as quickly as possible. If you can’t, consider asking your credit card issuer for a higher limit, which can help lower your utilization ratio.
- Applying for too much credit at once: Every time you apply for credit, a hard inquiry appears on your credit report. While a single inquiry might only cause a small dip, multiple inquiries in a short period can add up and significantly lower your score. Pro tip: Be strategic about when and why you apply for new credit. If you’re shopping for a loan, try to do it within a short period (usually 14-45 days), as multiple inquiries for the same type of loan within this window are typically treated as a single inquiry for comparative shopping purposes.
- Closing credit card accounts. While it might seem like a good idea to close a credit card account you no longer use, this action can negatively impact your score by reducing your available credit and shortening your credit history. Pro tip: Instead of closing the account, consider keeping it open and using it for small, recurring expenses that you can easily pay off each month. This can help keep your credit history intact and your utilization low.
- Defaulting on loans or declaring bankruptcy: Walking away from loans before they’re paid off or declaring bankruptcy are among the most damaging actions to your credit score. These events can stay on your credit report for up to 7-10 years, making it difficult to qualify for credit or get favorable terms. Pro tip: If you’re struggling with debt, seek help before things get to this point. The certified, compliant nonprofit credit counseling services that are a part of the CredEvolv platform can assist and help you explore options to avoid default or bankruptcy.
Smart habits to keep scores high
- Automate minimums + add extra payments
- Budget for debt paydown
- Monitor utilization weekly
- Check reports three times a year
- Avoid co-signing unless you’re willing to take full responsibility
- Consider a credit freeze for extra fraud protection
The right way to get help
Fixing your credit is not about gimmicks. It’s about steady habits and having experts in your corner. CredEvolv connects you with certified nonprofit credit counselors who help you lower utilization, resolve report errors, and create a roadmap to homeownership or loan readiness.
Small actions make big change – start today.
Ready to improve your score with a proven plan? Connect with a counselor now.