Credit Scores

A credit score is a numerical ranking of your credit history. That history is built when you start using credit and your account information is reported to one or all of the 3 credit reporting agencies. These agencies compile information sent to them into a report.  Each agency compiles a report so you actually have 3 credit reports. Items found on your reports include credit card accounts and installment loan accounts. Utility and rent payments are not reported unless you are involved in a special pilot program or those accounts are in collections.
The credit score is derived by inputting information from your credit reports into a scoring program.  There are 2 factors found in reports that have the most impact on your score. They are payment history and debt utilization. If these 2 factors are good than your credit score is likely to be fine.
A good payment history means building a long history of paying as agreed. A payment needs to be 30 or more days late before it is reported. One 30-day late payment will cause your score to drop in points. However, if it is just a onetime occurrence the effect is not likely to be severe. If you have a history of late payments the effect will be more significant. Making a payment 90 days late will have a greater negative impact than being 30 days late. Defaulting on loans, accounts in collections, and settling loans for less than you owe are all actions that will also cause a very significant drop in your credit score.
Debt utilization is the amount you owe compared to the amount of credit that has been extended to you. For instance if you have a credit card with a $1,000 balance and your current balance is $100, than your debt utilization is 10%. For credit cards it is best to keep your debt utilization below 30%. Even if you pay the balance in full each month, debt utilization should be kept below 30%. In addition, paying off or paying down loans can help build a credit score.  Even if you pay bills on time, high debt utilizations (also known as being maxed-out) can cause your score to drop.
A good article titled “Blunders That Can Ding Your Credit Scores” can be found on the America Saves web site at http://americasaves.org/blog/588-blunders-that-can-ding-your-credit-scores .