Have you ever wondered what the magic formula is that makes up your credit score? Here it is and I’m not even charging you for it.

It’s actually not as confusing as a lot of people think. Let’s look at them individually.

Payment History (35%)

The biggest of them all. Do you pay your bills on time? It’s just that simple. You make at least the minimum payment for all your bills and pay on time then you’re in good shape.

Amount Owed (30%)
How much money do you owe versus how high your credit limit is? For example, lets say you have a credit card with a $1000 credit limit and you have a balance of $600. That means you are using 60% of your credit limit (600/1000).

Length of Credit History (15%)

This one actually involve a little more than you would think. It not only includes your oldest credit account but also a few other factors including:

• The age of a consumer’s newest credit account.
• The average age of all of the consumer’s credit accounts.
• How long different types of credit accounts (mortgages, credit cards, auto loans, etc.) have been established
• How long it’s been since different types of credit accounts have been used

New Credit (10%)

Have you been applying for new credit accounts? Each time you apply for a new credit card or any other type of credit account where your credit is checked it puts a small dent in your score.

Credit Mix (10%)

This is the mix of credit accounts you have. Lenders like to see that you’re responsible enough to handle multiple credit types. For example, having a credit card, student loan and car loan and paying for them responsibly is looked at as better than having only two credit cards and paying them responsibly.

Your main focus should definitely be on payment history, amount owed and length of credit history. The others are helpful to know and be aware of but not as major.