Credit Score 101

The first thing to know about the credit score it that it is a complicated matrix on which an action, like opening a credit account, can impact one consumer's score quite differently from another depending on a myriad of factors. In a sense, your credit score is like a delicate ecosystem where a change in one element impacts everything else. But, as with any ecosystem, there are certain fundamental things it requires to be healthy.

Payment History

Your payment history is 35 percent of your credit score, according to the Fair Isaac Corp., which devised the credit score. It takes into account the number of payments you've made on time, the number of accounts you've paid as agreed, the amount past due on delinquent accounts and how long they've been past due. It looks at adverse judgements such as collections and bankruptcies. The farther collections accounts and bankruptcies are in your credit past, the less weight they hold in determining your score.

Amounts Owed

How much you owe is worth another 30 percent of your FICO score. This is also referred to as credit utilization. The score looks at how much money you owe, especially compared to how much credit has been extended to you. It looks at how much you owe on installment loans, credit cards, mortgages and other loans and what your original balance was. The score favors creditors who have low balances on several loans rather than a high balance on one. It would be likely to rate a consumer higher, for example, for having three loans and owing 20 percent of the credit extended on each rather than one credit card with 60 percent of the balance due.

Length of Credit History

The scoring system wants to see that consumers have shown a history of managing credit responsibly over time. It rates consumers more highly who can show through mortgages, credit cards, installment loans and other credit vehicles a history of managing credit and making payments faithfully. Fifteen percent of a person's score is credit history. By the same token, 10 percent is new credit which includes number of new accounts opened, numbers of times creditors have asked for your report because you applied for new accounts and how quickly you reestablished good credit after past credit problems. It's a red flag if you're applying for lots of new credit but if you're car or house shopping, all inquiries within a two-week period only count as one inquiry.

Types of Credit Used

This looks at what kinds of credit you have. Mortgages, auto loans and other secured loans are looked at more favorably than unsecured credit. In fact, consumer loans are also scored less harshly, according to Liz Weston of MSN Money.