Debt affects your credit score through five weighted factors in the FICO model: payment history (35%), how much of your available credit you’re using (30%), the length of your credit history (15%), your mix of account types (10%), and recent applications for new credit (10%).1myFICO. How Scores Are Calculated Carrying debt is not automatically harmful. What matters is whether you pay on time, how much you owe relative to your credit limits, and how long the debt has been part of your file. FICO scores run from 300 to 850, with 670–739 considered good, 740–799 very good, and 800 and above exceptional.2myFICO. What Is a Credit Score
Paying On Time Is the Biggest Lever (35%)
Whether you pay your bills on time is the single biggest factor in your score.1myFICO. How Scores Are Calculated Every credit card, loan, and other account gets tracked for on-time or late payments, and even one payment that’s 30 or more days past due can cause significant damage. The harm grows the longer the debt goes unpaid.3Experian. What Affects Your Credit Scores
Late payments are tracked in escalating stages: 30 days, 60 days, 90 days, 120 days, 150 days, and eventually charge-off, when the creditor writes the debt off as a loss.4myFICO. How FICO Considers Different Categories of Late Payments A 90-day delinquency hurts far more than a 30-day one, and a charge-off is among the most severe marks payment history can carry. Recency matters too. A late payment from last month damages your score more than one from several years ago, and you begin recovering by getting current and staying current on the account.
How Much You Owe vs. Your Limits (30%)
Credit utilization is the percentage of your available revolving credit you’re using at the moment. Divide your total revolving balances by your total credit limits: a $3,000 balance across cards with $10,000 in combined limits is 30% utilization. This factor accounts for roughly 20% to 30% of your score depending on the model.5Experian. What Is a Credit Utilization Rate
Lower is better. Once you cross roughly 30% of your available credit, the negative effect on your score becomes more pronounced, and people with the highest scores tend to keep utilization in the single digits.6Experian. What Is a Credit Utilization Rate – Section: How Does Credit Utilization Affect Your Credit Scores Because lenders report balances to the bureaus monthly, this factor updates frequently. A big purchase can temporarily spike your utilization even if you pay it off the next month.
One trap catches a lot of people: closing a card you’re not using can raise your utilization and lower your score. When the account closes, you lose that card’s credit limit, which shrinks your total available credit and makes your existing balances take up a larger share.7Consumer Financial Protection Bureau. Does It Hurt My Credit to Close a Credit Card If you carry balances on other cards, keeping unused accounts open generally helps.
Length of Credit History (15%)
The scoring model looks at the age of your oldest account, the age of your newest account, the average age across all accounts, and how long since you used certain accounts.1myFICO. How Scores Are Calculated A longer track record gives the algorithm more data, which generally helps.
This is why opening several new accounts in a short period hurts you beyond just the inquiries themselves. Each new account pulls your average account age down. It’s also a second reason to think twice before closing old cards, since the account’s age keeps contributing to your history as long as it stays open. If you’re newer to credit, becoming an authorized user on a family member’s long-standing account can add that account’s age and payment record to your report without requiring an application or hard inquiry on your end.8Experian. Will Being Added as an Authorized User Help My Credit
Credit Mix (10%)
Credit mix evaluates the variety of account types you carry. Scoring models distinguish between revolving credit (credit cards and lines of credit) and installment loans (mortgages, auto loans, student loans with a fixed payment and set end date). A profile showing you can handle both signals broader borrowing experience.1myFICO. How Scores Are Calculated
At about 10% of your score, mix won’t make or break your credit on its own. But if you’re close to a threshold, having only credit cards and no installment history could hold you back slightly. You shouldn’t take out a loan just to diversify, though this factor explains why someone with a mortgage and a credit card may score a bit higher than someone with only credit cards, all else being equal.
Newer scoring models are also starting to incorporate buy-now-pay-later loans. FICO launched a version of its Score 10 T model that factors in BNPL data and aggregates multiple BNPL loans together rather than treating each as a separate new account.9FICO. FICO Unveils Groundbreaking Credit Scores That Incorporate Buy Now, Pay Later Data As lenders adopt it, responsible BNPL use may help build credit for people whose first borrowing comes through these products.
New Credit Applications (10%)
When you apply for a card or loan, the lender pulls your credit report, creating a hard inquiry. Hard inquiries typically cause a small, temporary score drop and stay on your report for two years, though they only affect your score during the first year.10Equifax. Understanding Hard Inquiries on Your Credit Report Soft inquiries, like checking your own score or receiving a pre-approved offer, do not affect your score at all.11Consumer Financial Protection Bureau. What Is a Credit Inquiry
If you’re shopping for a mortgage or auto loan, each lender’s inquiry doesn’t count separately. Recent FICO versions group all inquiries of the same loan type within a 45-day window as a single inquiry, recognizing that you’re comparing rates for one purchase. Older FICO versions use a 14-day window.12myFICO. How Soft vs Hard Pull Credit Inquiries Work – Section: How Do Hard Credit Inquiries Affect Your Credit Score VantageScore uses a 14-day window for mortgage and auto inquiries.13VantageScore. Thinking About Applying for a Loan? Shop Around to Find the Best Offer This rate-shopping protection does not apply to credit card applications. Applying for several cards in a short period will result in multiple separate inquiries.
What Happens When Debt Goes to Collections
When you stop paying a debt for several months, the original creditor may sell the account to a collection agency. That creates a separate negative entry on top of the late-payment history already recorded, and collection accounts can cause a significant score drop, especially if your score was high before the account went to collections.14Experian. How Do I Get a Paid Collection off My Credit Report – Section: How Do Collections Affect Credit
How much collections hurt depends on the scoring model. Newer versions of the FICO Score (9, 10, and 10 T) and VantageScore (3.0 and 4.0) ignore paid collection accounts entirely. Older models like FICO Score 8, which many lenders still use, penalize you for any collection balance of $100 or more even after you’ve paid it.14Experian. How Do I Get a Paid Collection off My Credit Report – Section: How Do Collections Affect Credit Because you can’t predict which model a future lender will use, paying off collections is generally worthwhile.
You may see offers from collectors to delete the account from your report in exchange for payment, sometimes called pay-for-delete. The three major bureaus discourage the practice, and collectors’ contracts with the bureaus often prohibit removing accurate information. Even when a collector agrees, there’s no guarantee every bureau will process the deletion.
Bankruptcy
Bankruptcy is the most damaging debt-related entry on a credit report. Under federal law, a filing can remain on your report for up to ten years from the date the court enters the order for relief.15Office of the Law Revision Counsel. 15 U.S. Code 1681c – Requirements Relating to Information Contained in Consumer Reports In practice, the major bureaus remove Chapter 13 filings (where you repay creditors through a court-approved plan) after seven years from the filing date, while Chapter 7 filings stay for the full ten.16Experian. When Does Bankruptcy Fall Off My Credit Report
The initial score impact is severe and puts you in the highest risk category for lenders. The damage fades over time, especially if you build positive payment history on new accounts. Chapter 7 liquidation typically wraps up in a few months, while Chapter 13 repayment plans last up to five years.17myFICO. Bankruptcy Types and Their Impact on FICO Scores
Medical Debt Is Treated Differently
Equifax, Experian, and TransUnion voluntarily agreed to remove paid medical collections from credit reports and to stop reporting unpaid medical collections under $500, whether or not they’ve been sent to a collector.14Experian. How Do I Get a Paid Collection off My Credit Report – Section: How Do Collections Affect Credit These policies took effect in 2022 and 2023 and remain in place, though the bureaus could change them.
In January 2025, the CFPB issued a rule that would have prohibited all medical debt from appearing on credit reports. A federal court vacated that rule in July 2025, finding it exceeded the CFPB’s authority under the Fair Credit Reporting Act.18Consumer Financial Protection Bureau. Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V) So the voluntary bureau policies are the current baseline. Unpaid medical collections of $500 or more can still appear on your report, and newer scoring models like FICO 9 and 10 reduce the penalty for medical collections compared with other types of debt.
How Long Negative Debt Entries Stay on Your Report
The Fair Credit Reporting Act sets maximum time limits for how long negative information can appear on your report, and these limits apply whether or not the debt has been paid:
- Late payments: seven years from the date the payment was first missed.
- Collection accounts: seven years from the date the original account first became delinquent.
- Charge-offs: seven years from the date of the charge-off.
- Bankruptcy: ten years from the filing date, though Chapter 13 is typically removed after seven years by the bureaus.
- Paid tax liens: seven years from the date of payment.
These limits come from 15 U.S.C. § 1681c, which prohibits bureaus from reporting negative items beyond those windows.15Office of the Law Revision Counsel. 15 U.S. Code 1681c – Requirements Relating to Information Contained in Consumer Reports After the period expires, the item must come off automatically. If it doesn’t, you can dispute it with the bureau.
What Your Score Doesn’t Include: Debt-to-Income
A common misconception is that your debt-to-income ratio, your monthly debt payments divided by your monthly gross income, directly affects your credit score. It doesn’t. FICO Scores do not consider your income at all.19myFICO. Why Your Debt-to-Income Ratio Is So Important Lenders use debt-to-income separately when deciding whether to approve you for a loan or mortgage, so it still matters for borrowing decisions, but it won’t appear anywhere in your score calculation.