A three-digit number that creditors use to quickly evaluate whether to give someone a loan and how favorable the terms should be, the credit score remains something of a mystery to many. How is it figured out? What matters, and what doesn’t matter? The exact scoring system is a proprietary secret of the Fair Issac corporation, but there are 5 general categories, each weighted differently, that determine where you sit on the range from 300-850. In easy-to-read outline form, let’s take a closer look.

35% Payment History: Do you pay your bills on time?
+ for on-time
– for tardy or skipping

30% Utilization: How much are you using of all your available credit?
+ tapping less
– using up most of it

15% Credit History: How long you’ve held your accounts, how recently have you used them?
+ longer time, fewer accounts
– short time, more accounts

10% New Credit: How many accounts have you opened recently vs. your total number of accounts? How many recent credit inquires have lenders made?
+ fewer accounts, older, less inquiries
– more accounts, more recently, more inquiries

10% Types Of Credit: What kind of credit do you have?
+ showing a history of being able to pay off credit card debt (revolving debt) counts for more than a mortgage (installment loan)

So how can you use this info to improve your credit score? Well, you can change your behaviors so you’re doing more of the + stuff and less of the -. Also, check out your credit reports, all three of them, for free at annualcreditreport.com. The first thing you’ll want to do is make sure all the information is accurate, and if not, start disputing incorrect information that might be hurting your score.

FURTHER READING:
Credit Scores: What You Need to Know [NYT]
What’s in your FICO score [MyFICO]

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