There once was a time where people went into a bank, applied for a mortgage, and had a banker go over their recent billing statements, checkbooks and financial income. This was to help prospective lenders evaluate what type of funding you would be qualified to receive.

In 1989 Fair, Isaac & Company (FICO) introduced the ” Credit Score “.  The model introduced by FICO is based on consumer credit files from the three national credit bureaus: Experian, Equifax, and TransUnion. FICO scores range between 300 and 850.

Although the exact formulas for calculating credit scores are secret, FICO has released the following information on the major factors in determining your credit score, which go as follows :

1) Payment Record 35% of score

Your payment record is the main discretion in determining your score. Creditors like to see a positive payment record, meaning very little or no late payments. This shows that your are not only responsible but, reliable. Lenders and Creditors giving out loans and unsecured debt will almost always likely turn down anyone with any negative payment history. An easy way to maintain a positive payment history is setting up automatic payment withdrawal. One of the best ways to improve or maintain a good score is to make consistent and on-time payments.

2) Amounts Owed 30% of Score

What most people don’t realize, is that their behavior is a complete reflection of their credit score. If you have a $4000 credit limit and keep a $3900 balance, your score will be lower than that of a person with a $2000 balance and the same limit even if you are both paying on time monthly. Creditors look at consumers who consistently keep a high credit limit as a potential risk. Which is the main reason as to why it’s a good idea for you to keep low credit card balances and not overextend your credit utilization ratio.

3) Length Of Credit History 15% of Score

Usually people with an older credit history have better scores than newer consumers for the fact that they have more history to judge. This factor in the discretion is based on the length of time all of the credit accounts have been open. Newer accounts hold less weight than older accounts, usually because of the main factor, payment history.

4) New Credit 10% of Score

Once a few new credit accounts have been opened in a short amount of time, creditors see that consumer as a potential risk. More towards those with very little or no credit history at all. New credit puts a dent in your score at first, so it may turn off new potential creditors until they can prove you can keep a consistent payment history. Being conscious of how many cards you are opening, and how far apart is another great way to make sure you are maintaining a good credit score.

5) Types Of Credit In Use 10% of Score

FICO^® Scores consider the combination of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Credit mix is not a crucial factor in determining your FICO Score unless there’s very little other information from which to base a score.