The most popular credit score is the FICO score.
Fair Isaac explains exactly what factors influence your credit score.
- Payment history (35%) – This is your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.
- Amounts owed (30%) – This is based on the total amounts you owe, and the ratio of what you're allowed to borrow to what you currently owe, called your "utilization ratio." Maxing out your credit hurts it; keeping a lot of unused credit available helps it. Ideally, you want to keep your utilization ratio below 30 percent. So if you have a credit card with a $1,000 limit, you'd want to keep your balance below $300.
- Length of credit history (15%) – This considers the length of time each credit account has been open, and when each account was last updated with payment or usage info. As you might imagine, the longer your history, the better. This is why if you're going to cancel a credit card, all things being equal, ditch the newest and keep the oldest.
- New credit (10%) – This includes recent inquiries and requests for credit. Regularly applying for new credit cards or other loans will cost you.
- Types of credit used (10%) – There's all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.
Read more:
http://money.msn.com/credit-rating/article.aspx?post=cde9cea7-d05b-4dee-988e-0a27629c57ae&ocid=vt_twmsnmon
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