Your credit score is a reflection of how you’ve handled credit and loans. Credit scoring models are complex and vary among creditors. If a credit score factor changes, your score might change — but improvement generally depends on other factors too.
Nevertheless, scoring models usually consider the following types of information in your credit report to help compute your credit score.
Have you paid your bills on time?
You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.
Are you credit cards maxed out?
Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it’s likely to have a negative effect on your score.
How long have you had credit?
Generally, scoring models consider your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.
Have you applied for new credit lately?
Many scoring models consider whether you have applied for credit recently by looking at inquiries on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn’t counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not considered liabilities.
How many credit accounts do you have and what kinds of accounts are they?
Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.