The Most Important Credit Rating Factors

Whenever you apply for a loan or credit card, the lender checks your credit score to determine whether to approve your application and what interest rate to charge. Your credit rating considers many different components of your credit history, but they are broken down into a few major categories. Focus on the most important factors when you are trying to boost your credit score.

Payment History

Keeping all of your accounts in a positive status of "paid as agreed" is the single most important thing you can do to keep your credit score high. 35 percent of your credit score is based on your payment history. Make at least your minimum payment on time each month by setting up automatic payments or payment reminders. Budget your money carefully so you always have enough to pay each bill. Your payment history also considers negative public records, such as bankruptcy, foreclosure and court judgments. You can avoid these by following through on all of your financial obligations.

Amount of Debt

Your credit rating considers how much you owe on each of your accounts to make up another 30 percent of your score. Borrow only what you need to keep these numbers low and increase your credit score. Your credit score also considers the ratio of the amount you owe on each account to the amount you initially borrowed or the credit limit on the account. Make extra payments to decrease this ratio. According to MSN Money, you could hurt your credit score if any credit card balance is over 30 percent of the card's limit. Keeping the balance to 10 percent or less of the limit is best.

Longevity of Credit

The longer you have had credit, the better. When you first start building a credit file, your score will be low and each negative item on it will have a fairly large effect. Your credit score will improve as you manage credit responsibly over many years. 15 percent of your score is based on your credit length and another 10 percent considers the variety of types of credit you have. On the other hand, 10 percent of your credit score penalizes you for applying for and opening new accounts. Therefore, whenever possible, keep your oldest credit cards open and do not apply for new credit cards unless you need them.

Credit Report Accuracy

Your credit score is based on the information on your credit report, so even if you have excelled in the most important areas of your credit history, your score will only reflect this if your credit report is accurate. Check your credit reports for free through the Annual Credit Report website (see Resources) and look for inaccurate information. Dispute incorrect information that could be dragging your credit score down.