The two major scoring companies in the U.S., FICO and VantageScore, differ a bit in their approaches, but they agree on the two factors that are most important. Payment history and credit utilization, the portion of your credit limits that you actually use, make up more than half of your credit scores.
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
Even one missed payment, carrying high balances or co-signing a loan are some of the things that can hurt your credit. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page.
Under those circumstances, even if you don't make any additional charges, accruing interest can drive up your balances and utilization rate, and ultimately hurt your credit scores.
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit scores may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
The most important factor of your FICO® Score☉ , used by 90% of top lenders, is your payment history, or how you've managed your credit accounts. Close behind is the amounts owed—and more specifically how much of your available credit you're using—on your credit accounts. The three other factors carry less weight.
Since payment history is the most important factor in both of the two biggest credit scoring models – FICO Score and VantageScore – then paying your bills on time will have the biggest positive impact on your credit scores. Paying credit card balances in full is also a good idea.
Factors considered in credit scoring include repayment history, types of loans, length of credit history, and an individual's total debt.
Positive information on your credit report can stay on your credit history indefinitely. Accounts that were paid as agreed upon, but hasn't been active for 10 years, are likely to drop off after year 10.
Your 800 FICO® Score falls in the range of scores, from 800 to 850, that is categorized as Exceptional. Your FICO® Score is well above the average credit score, and you are likely to receive easy approvals when applying for new credit. 21% of all consumers have FICO® Scores in the Exceptional range.
In most states, the debt itself does not expire or disappear until you pay it. Under the Fair Credit Reporting Act, debts can appear on your credit report generally for seven years and in a few cases, longer than that.
Putting even small purchases on a credit card will add to your debt — and interest payments. If you carry credit card debt but paying cash is not an option, use a credit card that has the lowest interest rate you can get rather than the best rewards you can find.
While it may feel great to be debt free, it can actually hurt your credit scores.
There's a missed payment lurking on your report
A single payment that is 30 days late or more can send your score plummeting because on-time payments are the biggest factor in your credit score. Worse, late payments stay on your credit report for up to seven years.
Getting divorced
Actually filing for divorce doesn't directly impact credit scores, but if you have late or missed payments on accounts as a result, it may negatively impact credit scores. In community property states, property – and debts – acquired during the marriage are generally owned equally by both spouses.
For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts. If your home is repossessed and you still owe money on your mortgage, the time limit is 6 years for the interest on the mortgage and 12 years on the main amount.
Does Unpaid Debt Ever Go Away? An account in collection can have a significant negative impact on your credit, but it won't stay on your credit reports forever. Collection accounts generally remain on your credit reports for seven years plus 180 days from whenever the account first became delinquent.
If your misstep happened because of unfortunate circumstances like a personal emergency or a technical error, try writing a goodwill letter to ask the creditor to consider removing it. The creditor or collection agency may ask the credit bureaus to remove the negative mark.
Your payment history and your amount of debt has the largest impact on your credit score.