How your credit score is determined

There are three scores that determine the rate on all credit cards, car and student loans. They also determine if you will get that home loan at all. The scores are also used by employers, insurance companies and cell carriers.
They are your credit scores and hopefully this will shed a little light on how they are computed and what you can and can't do in regards to your score.
There are three credit bureaus in the country. Transunion, Equifax and Experian. For a mortgage you will be graded according to the middle score and each company has a different scoring model which can easily be 75 points apart.
Four main areas are used to compute your score.

Payment history is roughly 40% of your score. It's pretty easy; pay all your bills and pay them on time. You have 30 days to pay most bills before they go on your credit report. Consider automatic bill pay but I have seen on my own accounts it's not foolproof so for the things that impact your credit score such as mortgages, car loans, student loans and credit cards a quick check at the end of the month is in order. If you have a low score paying on time will make the score rise also. One missed payment can drop you 50-80 points. Especially on a mortgage.

Total debt is 35% of the scoring model. It's your usage ratio. If all your cards are maxed out this will have a very serious decline in your credit scores. Do not cancel cards that are open and have zero balances. You may wish to transfer some debt around in order to balance out the amount of debt you have on certain cards. The credit bureaus keep the exact way your score is computed a secret but I have heard if you keep your available balances under 80%, 50% and 30% this will maximise your credit score. For more information on how to improve your score please refer to
http://www.choicefinance.net/brent.htm#improvecredit

The length of time you have had credit cards open also makes a difference. So again DO NOT close accounts that are old and not used any longer. It is strange but trust me it will drop your score. You also need to be careful about opening too many new accounts as well. Also in the current credit crunch enviorment companies are closing cards that aren't used and reducing line amounts. Keep a close eye on that as well when you recieve your monthly statements. This is roughly 15% of your credit score.

The last part is what type of credit you have. You would like to have a few different types of credit, a home loan, a few credit cards and an installment loan. It's about 10% of your total score.
Credit cards are preferred to installment loans such as mortgages and student debts. If the number is wrong to the computer then it will hurt your score.

My frustration is that how to keep and get a high credit score is somewhat of a mystery. I highly recommend that you review your credit once a year at least to make sure that it's accurate. Steer clear of all the internet "free" credit reports. I would go to http://www.creditreport.com/

I hope this helps and please post something if you have questions. If I can answer and help I will.

Thanks,
Brent