According to Fair Isaac base calculations, there are five BASIC parts and percentages of credit history that affect a credit score.
Payment history (35%) includes accounts paid as agreed and those not paid on time. A late payment drastically affects your score. If you have a payment problem, contact your creditor BEFORE you fall past due. Don’t let an account go into collection. If an account falls past due, get it current as quickly. Good creditors will help you with special arrangements.
What you owe (30%) is not only how much, but what kind of accounts you have including how much of your credit card lines you use. Never max out your card limits. Keep your usage around half of your limit. The ratio of your debt to credit limit has a strong effect on your score. Don’t get more cards just to have more to use. Too many cards, or too few hurt your score. Maintain a responsible mix of credit cards and fixed loans. Pay down fixed rate loans somewhat faster than the scheduled term. Paying them off in very short periods and re-borrowing has a negative affect. Don’t payoff one loan or credit card with another. Frequent borrowing hurts as does no borrowing. Close out unused credit cards, but not all. A zero balance card can help your score.
Credit history length (15%) is the time your credit file has been active. If you have never had credit, get it started responsibly. The longer your active file is open, the higher your score.
New credit (10%) can help, but do not apply too frequently. Be watchful of automobile dealers and mortgage lenders. Automobile dealers “farm” out applications to numerous creditors, as will mortgage brokers. Too many inquires will hurt your score. Checking your own credit does not affect your score. When car shopping take along a recent copy of your report. A dealer may use that to make a determination for a loan approval.
The types of credit (10%) such as installment debt, credit card debt, bank debt, mortgage debt or finance company debt affect your score. Installment debt is better than revolving debt. Mortgage debt is better than automobile debt. Some finance company debts can lower your score.
If you have a mortgage, auto loan and two or three credit cards with balances below 50% of your limits (35% is about the best) and no finance company debt, you are on the way toward maximizing your score. Time and good credit management are the best items toward getting the best finance rates when you need them.