How to Understand and Upgrade Your Credit Score

One of the most important numbers in your life is your credit score. That three-digit number determines whether you qualify for a mortgage, what interest rate you will get on a credit card or auto loan, whether you can get an apartment and sometimes, even a job. Lenders and employers are increasingly looking at your credit score to determine whether you are financially responsible.

Instructions

1

Learn what factors do and do not affect your score. Your income, age or race has nothing to do with your score. What does matter is payment history, amounts owed, length of credit history, types of credit used and new credit. Your credit score ranges from 300 to 850. If your score falls below 660, you probably will not qualify for prime interest rates. Any score below 600 typically puts you in the subprime loan category.

2

Pay your bills on time if you want a good credit score. Payment history on your credit report accounts for the largest percentage of your credit score -- 35 percent. Payment history includes whether you make your payments on time or late, delinquencies and bankruptcies.

3

Keep a large amount of available credit. The amounts-owed category on your credit report accounts for 30 percent of your score. How much you owe on your credit cards and installment loans falls under this category. What makes your score go up or down is how much available credit you use. Maxing out your credit cards, for example, does not look good on your credit report; using only 25 percent of your available credit does.

4

Apply for credit. Length of credit history accounts for 15 percent of your score. The longer you have had a credit history, the better.

5

Keep a healthy balance of the types of credit you have. Types of credit accounts for 10 percent of your score. Your credit report lists your credit cards, installment loans and mortgages. You don't want to have a lot payday loans and nothing else, for example.

6

Say no when a retail store entices you to apply for credit if you are planning to apply for a mortgage or an auto loan. New credit accounts for 10 percent of your score. When you open several accounts in a short period, this sets off a red flag to lenders who look at your credit report. For people who don't have a lengthy credit history, applying for a lot of new credit looks especially risky, according to Bankrate.com.