If your credit needs some sprucing up, one of the first things you will need to know is how your credit is calculated. By knowing what goes into calculating your credit score, you can then take the right steps to raising your credit score.

• Bill payment history-35 %. Some people mistakenly think one late payment ruins their credit score. While your bill payment history is the most important factor in determining your credit score, it only makes up a little over a third. The most recent bills are where the most emphasis is placed, so if you have a late payment 2 years ago, that won't affect as much as one from 3 months ago. Accounts that are sent to collections will always hurt your score. Bankruptcy and foreclosures also fall under this category.
• Amount of money/available credit-30%. This category includes how much money you owe on things like your mortgage, credit cards, car loans, and so forth. The more credit you have available to you, the more of a credit risk you are. If you have 10 lines of credit and they are all maxed out, your score is going to be much lower than someone who has the same number of credit that is rarely used.
• Length of credit history-15%. This includes how long you've had a credit history. The longer you have had lines of credit open (and in good standing), the better your score.
• Mix of credit-10%. This includes the variety of credit you have, including revolving credit (credit cards) and installment credit (car loans and mortgages.) The better the mix, the better your score will typically be.
• Credit inquiries-10%. This means how often you are applying for new credit, but doesn't necessarily include shopping around for better interest rates when you are buying a car or home.

Improving your score
Now that you know how credit is calculated, you can go about improving your overall credit score. Here are a few ways:

• Pay down your credit cards. Experts recommend you keep your credit cards at no more than 30% of the maximum balance. A number of maxed out credit cards will make your score go down and lower your debt to income ratio.


• Pay your bills on time. One of the fastest ways you can raise your credit score and keep it in good standing is to simply pay your bills on time. If you have trouble doing this, or if you don't think you can make your payments, contact your creditors immediately. They do not want to send you to collections; they simply want to collect their money. Most places will work out a workable payment plan with you. You may also want to consider setting your bills up to be taken automatically from your account, so they are never late.

It's important to know how your credit score is calculated so you can improve your score.