Your credit score is always evolving. That means that you have direct control many of the key economic factors that go into calculating your score. Whether you're just starting out with your first car loan or credit card or you're in the middle of your earning years, how you repay your debts and whether you pay bills on time leaves an indelible footprint on your credit records. That means, aside from mistakes the credit bureaus make make, your credit score now and into the future is what you make of it.
According to the federal Consumer Financial Protection Bureau, credit bureaus place a huge emphasis on your credit history in determining your score. Your payment history accounts for 35 percent of your FICO score, while the length of credit history comprises 15 percent of the total score. Other key factors include the total amounts owed (30 percent), new credit (10 percent) and types of credit (10 percent).
Keeping your score in the "good credit" range
FICO credit scores range from 300 to 850. Most Americans, reports NOLO Law, maintain FICO credit scores higher than 750. CNN Money reports that not all scores are equal. A 790 on a FICO score is"excellent", while on a VantageScore model that goes to 990, it's pretty poor. FICO claims that its scores are used by 90 percent of all lending institutions. So for our purposes, let's look at the ways to main a score in the "good credit" range from FICO, or between 680 and 699.
Pay your bills now
One of the best ways to keep your credit score at cruising altitude is to pay ALL your bills on time, every time. If you have any past-due accounts (not collection accounts -- see below), now is the time to pay them down. Your ability to pay off loans prudently affects 35 percent of your score. Practically no other step will do as much for maintaining your credit than to clean it up now and create no new blemishes.
Eliminate outstanding charges or liens
Settle all charges and liens you accrued in the last 24 months. Addressing anything older than that won't make as much an impact. Start with the most-current ones and work back in time.
Improve your debt-to-credit ratio
Since your debt-owed factor accounts for 35 percent of your score, it makes good financial sense to improve it. The debt-to-credit ratio creates a snapshot of how much a risk you are in assuming additional loan obligations. If you appear close to financial difficulty, you'll certainly be strapped with higher interest rates. Avoid closing credit card accounts. It will decrease your amount of available credit and increase your utilization rate. Cutting up plastic may sound prudent, but the good history you may have had paying on the card is deleted from your record. Your FICO calculations may suffer.
Finally, don't race off and apply for a handful of new credit cards. A high number of qualification inquiries from lenders in a short amount of time is often viewed as a sign of financial desperation. Keep your existing revolving credit balances low and pay on time and your credit history should remain in good condition for years to come.