In this paper, we decompose credit default swap (CDS) spreads into a transitory component and a persistent component and test how these components are affected by the theoretical explanatory variables. We find significant but differing impacts of these explanatory variables on the extracted components. For example, equity volatility seems to have a larger influence on the transitory component, suggesting that its effect may be mostly short-lived, while our proxy for illiquidity has a greater impact on the persistent component indicating its more enduring effect. Also, the slope of the yield curve has impacts with opposite signs on the two components and so our analysis thus helps address the conflicting results reported in earlier studies without such a component framework. These results indicate that a two-factor formulation may be needed to model CDS options.