Factors That Determine Your Credit Score

Did you ever wonder what factors make up your credit score? Scores range from 350 to 850, and of course all of us want to be at the 850 end of the range -- or at least above that magic 620 mark that most lenders like to see. But what exactly do the scores mean, and how do the credit companies arrive at the number?

1. Your Credit Payment History (Approximately 35%)
   The number one factor in your credit score is your past history of making timely payments on your existing credit accounts. Lenders assume that if you've had the discipline to make timely payments in the past, you'll continue to use such discipline in the future.
    
2. Amounts You Owe Now (Approximately 30%)
   Lenders like to see balances that are smaller relative to the credit limits available to you. Having many open accounts is not necessarily a bad thing, but having many accounts near your credit limit suggests that you may be overextended.
    
3. How Long is Your History (Approximately 15%)
   Young people who've been in the workforce a short time and new immigrants who don't have a long history of credit in the United States often tell us they have problems in this area. Lenders look at the length of time you've been making regular payments.
    
4. New Credit (Approximately 10%)
   New sources of credit are considered more of a risk than established accounts, especially when many new accounts are opened at once. That's why it's not as good an idea as it may seem to close out that older, higher interest account even though you've already moved the balance to a newer account with a better rate.
    
5. Types of Credit (Approximately 10%)
   Credit scoring agencies do look for a healthy mix of different types of credit, but it's probably not a good idea to try to open or close accounts simply to adjust this balance.