Confused about credit? So are a lot of people. Let’s fix that.

Young, puzzled woman wants to learn about credit score factorsImage: Young, puzzled woman wants to learn about credit score factors

In a Nutshell

Credit can be a confusing concept. But if you want to understand your credit scores, you can start by focusing on high-impact factors like your credit card utilization, payment history and any derogatory marks on your reports.
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Question: Does checking your own credit hurt your credit scores?

Fortunately, this isn’t the case. As many of our members know, checking your credit scores on Credit Karma is reported as a soft inquiry and it won’t negatively impact them.

But that got us thinking: What questions or misconceptions do people have about credit? The factors that actually make up a credit score may be a lot different from what you think.


What’s in a credit score?

Below are the factors that are typically used to calculate your credit scores, by the level of impact they can have on your scores. Because there are different credit scoring models, how factors are weighted can vary slightly from model to model.

High impact credit score factors

Credit card utilization

This refers to how much of your available credit you’re using at any given time. It’s determined by dividing your total credit card balances by your total credit card limits.

Most experts recommend keeping your overall credit card utilization below 30 percent. Why? Because lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too much on it.

Payment history

This is represented as a percentage showing how often you’ve made on-time payments. Paying bills on time shows lenders and creditors that you’re reliable and more likely to pay back your debts.

Derogatory marks

Derogatory marks that may affect your credit include accounts in collections, bankruptcies and foreclosures.

Medium impact credit score factors

Age of credit history

This factor shows how long you’ve been managing credit. While your average age of accounts isn’t typically the most important factor used to calculate your credit scores, it’s important to think about. Closing your oldest credit card account, for example, could end up negatively impacting your scores.

Low impact credit score factors

Total accounts

This refers to the number of credit cards, loans, mortgages and other lines of credit you have.

Hard inquiries

Hard inquiries usually occur when you apply for a new line of credit, such as a loan, credit card or mortgage, but can also take place when, for example, you rent an apartment. A lot of hard inquiries on your credit reports within a short time period may suggest that you’re desperate for credit or aren’t getting approved by other lenders. Hard inquiries can slightly lower your credit scores.

As mentioned above, salary, age and employment history don’t factor into your credit scores. Other things that don’t go into your scores include:

  • Race/ethnicity
  • Religion
  • Nationality
  • Gender
  • Marital status
  • Where you live
  • Your total assets

Also, while soft inquiries may be included on your credit reports, they don’t affect your scores. These generally occur when a person or company checks your credit as part of a background check — think employer background checks or pre-qualified credit card offers. Another example of a soft inquiry? Checking your credit scores on Credit Karma.


Next steps

Though a lot of credit misconceptions exist, credit doesn’t have to be hard to understand. By recognizing the basic credit score factors, you can learn how to maintain and improve your credit health with confidence.


About the author: Mika Bhatia is an Editorial Content Strategist for Credit Karma. She's worked in financial services and tech, and has now found the perfect union of the two at Credit Karma. When she's not busy strategizing about cred… Read more.