Credit Score Tricks

Credit can impact your life in numerous ways. Your FICO credit score ranges from 300 to 850. Lenders check your credit before approving a loan and employers may check it before making a hiring decision. It's important to know the factors that contribute to your credit score and what tricks you can implement to achieve the best score possible.

Don't Miss Payments

The largest factor that impacts your credit score is how well you pay your bills. According to MyFico, this represents 35 percent of your FICO score. To raise your score, it's imperative that you make at least the minimum payment on your credit accounts each month. Late payments will cause your score to drop; how much of a drop depends upon how late the payment is and the other items present on your credit report. Other items that can drop your score include bankruptcy, charge-offs, repossessions, judgments and tax liens. For the highest score, honor all of your credit obligations.

Pay Off Debt

Another 30 percent of your score measures the amount of debt you have. This component looks at two areas. The first is your credit utilization ratio. This ratio measures how much credit you have available versus the amount of credit that you're using. The more credit you have available, the higher the ratio and the higher your credit score. This is why maxing out credit cards will lower your credit score. The second area is the amount of installment debt you're carrying. This is debt with fixed payments as opposed to the revolving debt of credit cards, such as a car loan, a mortgage or a personal loan. As you pay down installment debt, this also increases your credit score.

Be Careful With New Credit

Part of your FICO score represents the amount of recent credit that you have. This is 10 percent of your score. Although FICO encourages new credit, if you open too many new accounts at the same time, FICO will view that as risky behavior and it will drop your score. Also keep in mind that opening new accounts impacts another 15 percent of your FICO score, which is the length of your credit history. A long credit history increases your credit score. Each new account shortens the average length of your credit history and this may drop your score. Plus, the final 10 percent of your FICO score represents the type of credit mix you have. Having a variety of credit, such as credit cards and loans, increases your score, but FICO warns consumers not to open new credit accounts just to achieve a better credit mix. It could lower your score instead. Only open new accounts if you need them, not to improve a credit score.