Paying Bills on Time
This represents 35% of the credit score. Late payments of more than 120 days or more re the worst for your score. They are often listed as "charge off". Payment histories generally last a year and are reported monthly. The key to improving your score is maintain current payments or contact the creditor to get into a payment arrangement that they will report as "current".
Amount and Type of Debt (30% of the Score)
This includes the total amount you owe, the amount by account type (revolving, installment or mortgage) the number of accounts on which you are carrying a balance and how much of the credit line you have drawn down. being "maxed out" is bad, but owing just as much on two cards instead of one is much better. Have credit cards on which you owe nothing. This will increase your score even if you never use them!
The length of time you have been using credit makes up 15% of the credit score. Accounts that have been current for two years are the best for your credit score. Even if you want to get rid of a particular card that you have had for a long time in favor of another, keep the card at a zero balance and do not use it!
Change the type of debt if you can!
The variety of types of debt makes up 10% of your credit score. A mix of debt is usually good, but you do not want to have finance company loans if you can avoid them. Better to have student loans or mortgages or even credit card debt than loans from certain types of business.
Open new acconts only if you can afford them!
Opening new accounts raises the question "Can you afford this new debt?" The number and types of accounts opened in the last six (6) months will make up 10% of your credit score. If you show over the next six months that you can afford the credit that will help your credit score!
Go to myFICO.com
Your credit score is based on the algorithms developed by this company, the Fair Isaac Corporation. Go to their web site and learn more about the credit scoring process!
Get a copy of your credit report!
Once a year you can get a free consolidated report at www.annualcreditreport.com Before you pay someone, get it for free and read my next article on how to fix errors! Good Luck!