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What Affects A Credit Score

Your credit score may not seem all that important until you need it. From apartment applications to your car loans, this three-digit number is the key to your major life milestones. 

Whether you’ve recently checked your credit score, or finally Googled what a credit score is, you may have questions about what makes up a credit score and how it is calculated. While the world of credit is pretty simple, many of us weren’t giving a 101 course in credit score so we don’t blame you for needing to know the basics.

Keep reading for the ultimate breakdown of what affects your credit score, so you can build your credit like a pro. 

So, How Does My Credit Score Work?

Your credit score is a tangible way for lenders to assess the risk of lending you money. It’s a calculation of how unlikely you are to repay a loan, based on your previous history with credit.  

Imagine a stranger asks you to borrow some money; what would rather know about them? How many times they've paid other people back OR how many times they didn't and why? You'd probably focus on the negative to find out if they'd do the same thing to you. Well, a credit score works the same way. It focuses primarily on the things you do wrong vs do right. So do things right from the beginning!

We're here to help clearly explain the rules and how to stick to them. The higher the credit score, the better you demonstrate the ability to pay off any loans, pay rent etc. Your credit score can be the deciding factor of whether you get a loan to begin with, and it can impact your interest rates on loans. 

Credit bureaus analyze credit reports to provide a credit score. There are three credit reporting agencies that dominate the credit market: TransUnion, Equifax, and Experian. Each credit bureau uses different methods so it is common to have a different score on each. 

Let’s run through the basic pillars that affect your credit score:


Payment History

Your credit report reveals your payment history (AKA whether you pay your bills on time). Many major scoring companies rank payment history pretty high for influencing your score.

Payment history reveals whether you show risk when it comes to meeting debt obligations, which means paying your bills is a must (even if it’s just $50!).

Remember you should not only pay your bills, but pay them on time. Paying your bills late by 30 days or more can affect your score negatively. Plus, the later you procrastinate paying, the more damage can be done.

Forgetting due dates is human, and it can happen more than we’d like to admit (like your five-year anniversary or your Mom’s birthday). To be safe, rather than sorry, — set up automatic payments on your bills, so you don’t miss any due dates.

Credit Utilization

Credit utilization, also known as a Debt to Limit Ratio, is the amount of your credit limit you are using in the form of a percentage. The lower the credit utilization, the lower your balance is to the total amount you could have on your credit card. 

Credit utilization is the second biggest influence on your credit score after payment history for most scoring companies. A lower credit utilization ratio shows you have more flexibility when it comes to your finances and are capable of paying off your debts. 

The biggest recommendation is to use no more than 30% of your available credit. If you have a high credit utilization, don’t freak out! Once you pay down your high balance, the damage to your credit should disappear. 

Extra Tip: You can keep your credit utilization low by setting balance alerts, or making extra payments throughout the month. 

Length of Credit History

The longer your credit history the better. The length of your credit history affects your credit score, but not as much as payment history or credit utilization.

This is something to keep in mind when deciding whether to close old accounts, for example, closing an old credit card. You really shouldn’t close old accounts without a pressing reason like a high annual fee. It will essentially delete the history you have with that credit line.  

The length of your credit history helps show how credible all the other factors of your credit score are. With older accounts, there is a more accurate and representative time frame to judge your financial behavior. 

It is much easier to judge years worth of credit history rather than just a few months. 

Diverse Credit Types

A small influence on your credit score is having different types of credit. There are two different types of credit accounts: revolving accounts and installment loans. Having diverse types of credit can show you are able to manage different financial products simultaneously. 

Hard Inquiries 

When you submit an application that requires a credit check it will show up on your credit report; this is known as a hard inquiry. Also known as hard pulls are when you apply for credit. These inquiries will cost you points on your credit score if they happen frequently during a short period of time.

While one or two inquiries shouldn’t make much of an impact, if you submit many inquiries in a short period of time this can ding your credit score.

To avoid this, keep your applications to a minimum, and understand the difference between a hard and soft inquiry. 

A soft inquiry (or soft pull) happens when you (or a creditor trying to pre-approve you for a loan or credit card) check your score. This has no impact on your credit score. 

What Doesn’t Affect Your Credit?

Like all rumors, there are many widespread misconceptions about what can influence your credit score. We are here to clear the air!

Income, bank balances, and employment status can influence your applications for apartments or car loans, but they don’t factor into any algorithms that calculate your credit score. 


Another area of confusion lies around debit cards. While most debit cards have zero influence on your credit score, Extra is the first debit card to enable you to build credit.

Extra Benefits

Extra is an enigma in the world of debit cards. We’ve made building credit super simple with one tiny debit card. So, how does this really work?

You can sign up for Extra by connecting it with your bank account. From here, we will determine your spending limit based on your bank balance with no credit check. 

When you swipe your Extra Card to buy groceries or that pair of shoes on your wishlist, we spot you for that purchase and automatically pay ourselves back the next business day.

At the end of the month, we total up all of your transactions made with Extra and report them to credit bureaus as credit-worthy payments. 

In a sea of risky credit card options, Extra is a rare alternative for establishing your credit that is accessible to everyone!

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