How is my credit score calculated?
The five factors, weighted.
A three-digit number determines whether you pay 3% or 7% on a mortgage, a difference of $50,000+ over 30 years on a $400K home. Here is how the score works, what actually moves it, and how to build one from zero.
Your FICO score is 5 weighted factors: payment history (35%), amounts owed (30%), length of history (15%), new credit (10%), credit mix (10%). The single biggest lever is never missing a payment. The second is keeping utilization below 30%, ideally below 10%.
- Payment history (35%): one 30-day late payment can drop your score 50–100 points. Autopay minimums as a safety net.
- Credit utilization (30%): balance ÷ limit. Below 10% is optimal. Paying before the statement date reduces reported utilization.
- Length of credit history (15%): keep your oldest card open, even if unused. Average age of accounts matters.
- New credit (10%): each hard inquiry costs ~5 points for ~12 months. Batch applications within a 14-day window for rate shopping.
- A score above 760 gets you the best rates on everything. Above that, returns diminish.
This page covers personal finance fundamentals that apply regardless of your view on Bitcoin or fiat currency.
The 5 FICO factors
Your FICO score (used by 90%+ of lenders) is built from five weighted inputs:
- Payment history (35%): Have you paid on time? A single 30-day late payment can drop your score 60–110 points. Set up autopay for minimums on everything.
- Credit use (30%): How much of your available credit are you using? Lower is better. See below.
- Length of credit history (15%): Average age of your accounts. This is why you should never close your oldest card.
- Credit mix (10%): Variety of account types (credit cards, auto loan, mortgage). Do not open accounts just for mix.
- New credit inquiries (10%): Hard pulls from applying for new credit. Each one dings 5–10 points for ~12 months.
What a 760+ score is worth
On a $400,000 30-year mortgage: a 760 score gets roughly 6.5% (April 2026). A 620 score gets roughly 8.1%. Monthly payment difference: ~$400/month. Over 30 years: $144,000+ in extra interest for the lower score. Same house. Same income. Different three-digit number.
The same math applies to auto loans, private student loans, and credit card APRs. A strong credit score is not a vanity metric, it is a direct savings account that pays you every time you borrow.
Building credit from zero
No credit history is different from bad credit. If you are starting from nothing:
- Secured credit card: deposit $200–500 as collateral, use it for one recurring charge, autopay the full balance monthly. Discover it Secured and Capital One Platinum Secured are solid options.
- Authorized user: ask a parent or partner with a long-history, low-use card to add you. Their account history transfers to your report immediately. You do not even need to use the card.
- After 6–12 months: apply for a regular unsecured card. Your score should be 680+ if you kept use low and paid on time.
The use truth: 10%, not 30%
You have probably heard "keep use below 30%." That is the threshold where your score starts to drop noticeably. But for maximum score optimization, keep reported use below 10%, ideally 1–5%. People with 800+ scores typically report 1–3% use.
Tip: pay your balance down before the statement closing date (not just the due date). The statement balance is what gets reported to bureaus.
Protect yourself: credit freezes
Freeze your credit at all three bureaus (Equifax, Experian, TransUnion). It is free, takes 10 minutes, and prevents anyone from opening accounts in your name. You temporarily lift the freeze when you apply for credit. There is no reason not to do this.
Free monitoring: Credit Karma (TransUnion + Equifax scores, free), AnnualCreditReport.com (full reports from all 3 bureaus, free weekly).
Bitcoin connection: a strong credit score gives you optionality. Low-rate debt (mortgage at 6.5%, auto at 4%) that you can arbitrage against higher-returning investments is only available to people with strong credit. Build the score, then use it strategically.
Last updated 2026-04-15. Not financial advice.
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