Things That Affect Your Credit Rating

Your credit rating, more commonly referred to as your credit score, is derived from a formula created by the Fair Isaac Corporation or FICO. Your FICO score falls somewhere in the range of 300 to 850 and is comprised of a rated formula that takes several factors into account simultaneously -- each weighted differently.

Payment History

Your payment history on your credit accounts -- credit cards, loans and mortgages -- makes up about 35 percent of your credit rating. Late payments on accounts are reported to the credit bureaus (TransUnion, Experian and Equifax) after 30 days of nonpayment. Even one payment will affect your credit score; multiple missed payments, collection accounts and adverse public records will have a severely detrimental impact on your credit rating.

Amounts Owed

The amount of your outstanding debt makes up another 30 percent of your credit score. Your owed amount takes into account your total balances, ratios of debt to available credit and your total number of accounts. Having high balances on revolving accounts like credit cards will lower your score, while low balance-to-credit ratio can help your score.

Length of Credit History

Your credit history length makes up 15 percent of your credit rating and takes into account the total length of time you've had credit accounts or loans, along with the time since your last credit activity. Young people just starting out with credit will be more affected by this factor than someone with 30 to 40 years of credit history.

Amount of New Credit

Amount of new credit comprises 10 percent of your score and takes into account the number of new accounts you open, new credit applications you file and the amount of time since your last credit inquiries. Applying for many accounts in a short period of time is not wise -- it can negatively impact your score because it appears that you're attempting to overextend yourself with credit.

Types of Credit Used

Types of credit used makes up the remaining 10 percent of your credit rating. This section weighs accounts depending on their type -- credit card, loan, student loan, mortgages, etc. It's wise to have a mix of accounts to maximize the benefits of this credit score factor.