On this page you will find an explanation of how your credit score is determined and what you can do to have a positive influence on it. A personalized Debt Navigator Plan can show you how you can manage and control your credit score and, of course, your debt and financial future.

Your payment history is the most important factor when determining your credit score. Although they take into consideration your complete history, there is more of an emphasis on the most recent 6 months. The best practice is to pay your bill early (and save a little on interest as well) but never late. Being late with payments or having your account sent to either a collections department or a collection agency is very bad.

The second most important factor in determining your credit score is how much debt you have outstanding compared to the maximum potential debt. For example, if you have 5 credit cards all with $10,000 limits then your maximum potential debt is $50,000. This includes all types of debt whether it is a mortgage, credit card, a car or student loan, etc. Statistically, people typically use most or all of the credit available to them and are viewed as a credit risk. The general rule of thumb is to only use 30 – 50 percent of your maximum potential debt. How much outstanding debt you have is also a factor when you are being considered for a loan.

The third factor that goes into determining your credit score is your length of credit history. The longer you have had credit with a lender the better it is for your score. This is another way balance transfers have a negative effect on your score. You are better off maintaining an account while building and developing a relationship with one lender, rather then constantly opening and closing accounts to move balances.

The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. Consumers with a variety of experiences are better credit risks. Lenders view people with a mix as people who have shown that they know how to handle money.

The fifth and final factor used when determining your credit score is how often you apply for new credit. The calculation takes into consideration if you are making a large purchase like a car or home and looking for the best rate. If there are already any red flags on your credit report then frequent applications are bad. Unless shopping for the best rate, you should not apply for new credit more then 4 times in any one year.