The Breakdown of Your Credit Score

If you've already checked your credit score on Credit Karma and Quizzle, two companies I wrote about in an earlier post, then you might be wondering how that number is determined.

Fico.com determines it by the following factors:

Therefore, if your credit score is lower than you want it to be, make sure you do the following:

1. Always pay on time, if you accidentally missed a due date, call the debt holder and ask for them to not post any negative information because you have been a 'good client'
2. Pay down your debt, all of your debt and don't close down your cards as they represent the total available credit to you
•  Debt (balances on your cards) to available credit (total combined credit limit available to you on all cards) should be under 10% every month
• Please remember that even if you pay your credit card in full every month, the balance that is due every month is the balance that gets reported, therefore if you have $5K as the credit limit, but every month you charge and pay $4K on the due date, your debt to available credit is 80%
• To lower your debt to available credit ratio, pay down your credit card before the card calculates your balance for the month
3. Don't close oldest cards or any cards at all in my opinion (unless they have outrageous annual fees that just would not make sense to keep)
4. Don't open any new cards or apply for any new loans so no new inquiries are posted on your credit report
5. Make sure you don't have any store cards (if you close any that you already have, you will probably be affected negatively though)
• This one is a little bit tricky as with 'types of credit,' FICO means you need to have credit cards, installment loans such as student loans, mortgages, etc. - I recommend staying away from all debt besides an affordable mortgage and reasonable student loans. You should have a couple credit cards just so your available credit is high.