Factors Affecting Your Credit Score

While we don't know exactly how
a credit score is determined, FICO considers the following factors (the approximate weight it assigns
to each factor is in parentheses):

1 - Payment history (35%). Your score is negatively affected if you have paid bills late, had an account sent to collection or declared bankruptcy. The more recent the problem, the lower your score -- a 30-day late payment today hurts more than a bankruptcy five years ago.

2 - Outstanding debt (30%). If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.

3 - Length of your credit history (15%). The longer your accounts have been open the better.

4 - Recent inquiries on your report (10%). If you have recently applied for many new accounts, that may negatively affect your score. Promotional inquiries don't count.

5 - Types of credit in use (10%). Loans from finance companies generally lower your credit score. FICO says this is most important when there isn't a lot of other information upon which to base a score.

Although this is a good guide as to what credit scoring companies deem important, keep in mind that some companies may consider different factors.

Among the items that credit scoring companies cannot consider are age, race, gender, education, national origin, marital status and receipt of public assistance.