Ever wonder how your credit score is determined? While Fair Isaac (the company responsible for FICO scores) holds the details of their calculation very close to the vest, there are some generalities out there that are good to know. Here’s a quick rundown, as well as an indicaiton of the relative importance of each component:
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Types of Credit Used – 10%
So… If you want to maintain a high credit score, you’ll want to pay on time, keep your balances low relative to your credit limits, and keep your older accounts open if you don’t actively use them — this latter point increases average age and decrease utilization.
Obviously, cashing applying for a bevy of 0% credit card offers, or signing up for cards to snag free credit card miles or signup bonuses can have a negative impact on your score. However, things like new credit apps are a relatively small part of your credit score when compared to things like paying on time.