Credit Score Factors: How Do Lenders Determine Whether You’re a Bad Bet?

March is National Credit Education Month, which sheds light on what we consider an essential topic for every adult—credit scores and how they work. This subject is particularly vital for insurance purposes because credit health can directly affect auto insurance rates. If you maintain a high score, you’ll probably enjoy a more affordable premium than someone with bad credit. So, how do you get those excellent rates? Let’s look at the primary credit score factors.


Payment History


The United States has two leading credit-scoring companies, FICO and VantageScore. Both rely heavily on payment history when calculating your credit. They even factor in how late you pay your debts. For example, a bill paid 90 days late lowers your credit more than one paid 30 days after the deadline. So, make every payment on time, and then you can usually breathe easy about your score.


Credit Usage


Card utilization is also one of the significant credit score factors. “Credit usage” refers to the ratio between the amount you owe and your credit limit. It can also apply to installment loans for items such as your vehicles and mortgage. So, if you max out your cards frequently, a lender or insurance company might consider you unreliable.


Credit Mix


This isn’t one of the main credit score factors, but it’s still considered. Your credit health can improve if you maintain various types of credit, such as cards and installment loans.


Credit Age


Older credit accounts can boost your score, especially if they have excellent payment histories. This happens because the aged lines of credit prove you can make payments over a long period. However, new accounts can lower your score if you open several in a short time. This action demonstrates a need for loans and a possible change in economic circumstances.




A lot of debt can lower your score, so pay as much off as you can without incurring more.