There are 5 Main Areas that are critical in your credit make-up, & its effect on Credit Scores - it is much more than paying your bills/debts on time. :
1. Paying accounts on time is IMPORTANT. (Equals to 35% of your credit scoring). If you make a payment by its due date, or within 29 days past the due date, it should not affect your credit score, in most cases. If your payment is received 1 day past its due date, you may have to pay a late fee, but it will not show up as a negative on your credit report, unless over 30 days late. As a friendly remember: don't take chances when mailing in your payments, try to always pay by the due date - a 30 day late will drop your credit score and can remain as negative credit being reported for seven years!
2. Accounts- balances owed vs credit limit available. (Equals to 30% of your credit scoring). A good rule to follow, especially on credit cards, keep your balances less than 50% of your available credit limit, actually 35% is better. When you start using more than this, or worse yet, max the card out - your credit score will take a direct hit! -with scores spiralling downward. Even if you are paying on time, every month...maintaining balances more than 50% of your credit limits...your credit score will be affected, with points taken off your score.
3. Length of credit history. (Equals to 15% of your credit scoring). It should be your goal to have a long, positive credit history with a variety of accounts: credit cards, installment loans, mortgages. Anything over 5 years old is considered very established, 7 years is much better. Remember: do NOT pay off your charge card and then close it, especially if you have had it for five years. Credit cards can be your friend & boost your credit scoring. Just resist the urge to use what you can't handle, never using more than 50% of available credit per card. The longer that credit card is opened - and used wisely - the better your credit score! even if you aren't using it, maintaining a zero balance.
4. Applying for New Credit. (Equals to 10% of your score). Inquiries do have an affect on your credit scores, but there are different variables. Just try to remember this, try not to appear like you are trying to get several credit cards in a short time span. Example: Christmas. Several dept stores will be making offers "save 10% off your purchase if you apply for a credit card with us". If you did this with 5 stores within a week - you BET your credit scoring would be affected and take a downward hit. It's really best to stay away from department store credit cards since they tend to have lower limits and give no true value. Now there is a different rule with shopping mortgage rates or car rates. You may find a home & talk to 5 lenders before making a decision on which one to use, if done within a week or two, this will not have much affect on your credit scoring, perhaps as little as one hit for 5 inquiries (instead of 5 hits for 5 inquiries).
5. Maintaining a Variety of Accounts. (Equals to 10% of your score). As said in number 3, have a variety of accounts such as credit cards, installment loans, mortgages and manage them wisely.
Rules of Credit doesn't stay the same, but this is your best bet of rules to go by, for today's standards. So please follow the above. You will be rewarded for good credit behavior by having better credit scores - giving you the best rates & programs available!
Your FICO or Beacon Scores will be slightly different between the credit reporting bureaus. It is wise to pull your credit reports from the three top agencies: TransUnion, Equifax and Experian, which is FREE to do once a year.