Your credit score acts as a numerical rating that sums up how responsibly you've handled credit in your life. The highest score possible is 850, and the lowest is 300. Generally, scores higher than 700 will qualify you for premium rates while scores lower than 500 risk outright denial on many loans. Scores in between often get approved, but at progressively greater cost in terms of interest and fees.
Late Payments
Though not every creditor reports every late payment to the credit bureaus, those that do get reported will count against your score. If you catch up on payments, that may also be noted. However, the bonus for catching up will not cancel out the penalty for being late in the first place.
A single late payment is no big deal, but a long history of late payments on different accounts will seriously reduce your score.
High Debt Amount
Exactly how much debt you've accumulated isn't important. A lawyer with $10,000 of debt is doing fine. A college student with the same amount is stretching it. What lenders care about is your accumulated debt compared with your current income, and especially your monthly minimum debt service compared with how much you take home.
If you have a lot of debt as compared to your monthly paycheck, don't expect to easily accumulate more credit.
Kinds of Debt
A credit profile with $50,000 in credit card debt looks worse than a credit profile with $150,000 in mortgage, auto loans and a small credit card balance. If you have a lot of consumer debt as opposed to investment debt, your score will suffer.
Adverse Reports
Adverse reports or collection actions can seriously harm your credit rating. Examples of this kind of action include bankruptcies, bills sent to collection agencies and loans or leases you've defaulted on.
Not only can these items harm your numerical score, but many lenders may require you to prove that you've resolved the reported item before giving you any credit at all.
Improving Your Credit Score
When it comes to improving your score, some factors just have to be waited out. The length of your credit history and amount of new debt will only be cured by time. However, establishing a regular pattern of paying your bills on time will improve your score every month. Also resolve all adverse reports on your credit report. This may not improve the actual numerical score but will help when negotiating with lenders who check the report.
It sometimes helps to take out an appropriate, easily paid off loan and start making payments. Get a small credit card and assign one of your monthly bills to it, then set up your bank to pay the credit card off automatically.
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