What Factors Make Up a Good Credit Score?

Your credit score is an important aspect of your financial profile. Lenders use it to determine how much they will charge you for borrowing money. With a good credit score, you will save by paying a lower interest rate if you take out any consumer loan, including a mortgage loan or a car loan. Even in everyday matters such as renting an apartment, landlords look into your credit score. The FICO score developed by the Fair Issac Corp. is a commonly used credit score in the U.S. You can develop a good credit score by paying attention to some factors.

Prompt Payment

Paying your bills on time is the most important contributor to maintaining a good credit score. This accounts for 35% of your FICO score. Paying your bills late, declaring bankruptcy and other factors that make you miss your bill payments take a toll on your credit score. On the other hand, paying your bills on time adds up to a good credit score.

Extent of Use

How much of your available credit do you use? The more of your available credit you use, the closer you will be to maxing out your credit limits. This will tend to lower your credit score. Other factors that determine the extent to which you use the credit available to you is how much you owe on your credit cards and how many of them you have balances on. This factor makes up about 30% of your FICO score.

Old and New Credit

The further back your credit history goes, the better it is for your credit score. That does not mean that you can't get a good credit score with a brief credit history. If you have managed your credit well during the brief period you have had access to it, that will positively contribute to your credit score. The length of your credit history accounts for 15% of your FICO score. If you are looking to open a new credit line, that's another factor that impacts your credit score. It is better to shop for a new credit card within a brief span of time, such as 30 days, rather than spreading it out over a longer time. Credit scoring systems tend to discriminate against multiple inquiries and will lower your score further. New credit accounts for 10% of your FICO score.