There are basically five different things that make up your credit score. So knowing what those are and what you can do to affect them is important to you.

  1. Payment History is 35% of your credit score – This is the biggest part of your credit score and the toughest to fix if you mess it up. This part of the score is the easiest to understand. Pay your bills on time, every time. Never make a late payment. If you have something that happens and causes you some financial problems do everything in your power to make at least the minimum payment on time. By making the minimum payment on time, you keep your good history. Then when you get things under control, you can go back to paying the full balance or a larger portion depending on what you were doing before.
  2. Amounts Owed is 30% of your credit score – This takes the balances of all your credit that you have borrowed. This is one of the tougher ones to control. You can’t change your mortgage or your automobile loan amounts, but you can control your credit card balances. Keep your credit card balance to below 30% of your available credit balance on your cards. This will help you keep this part of your score working for you.
  3. Length of Credit History is 15% of your credit score – The older your credit is the more it helps your credit score. If you credit card is a new card then for a while it will actually hurt your credit score. But as it ages, it will begin to help your credit score. If you have older credit cards that you don’t use because they charge too much interest, then contact the creditor and ask for a reduction in your interest percentage. Keep the card and use it because it will help your credit score.
  4. New Credit is 10% of your credit score – When you apply for credit it causes inquiries. These inquiries on your credit report will hurt your credit score, additionally, remember that New Credit also hurts your score for a while until it has aged. So if you are applying for new credit, it is best to apply all at once, get what you want, then don’t apply for anything new for quite a while. This will hurt your score briefly but then will start helping your score.
  5. Types of Credit Used is the final 10% of your score – Most of the credit bureaus hide what they mean when they say “Types of credit” but understand that if the credit bureau see a lot of Department Store Credit Cards or Gas Company Credit Cards rather than Mastercard or Visa cards, it seems to count against you on your credit score. Additionally, having way too many cards for your income could also be a factor.  

So, if you have credit cards and most Americans do, Pay them on time, keep your balance below 30% of your available credit, use your older cards, try not to apply for any new credit unless absolutely necessary, and use the major card companies rather than department or gas credit cards as your main credit. Bad credit can be recovered from if you know what makes up your credit score and you work to keep improving it. Read your credit history report closely and make sure it is accurate.

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Article Source:http://www.articlesbase.com/credit-articles/how-do-they-figure-my-credit-score-933393.html

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