What Makes Your Credit Score Great?

by Eric H. Doss

Overview

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A credit score is a numerical representation, between 300 and 850, of a borrower's ability to repay debt, also known as creditworthiness. Any score above a 700 is considered great. The three main credit bureaus provide credit reports and scores: Equifax, Experian and TransUnion. Each bureau uses a different formula to calculate risk and your credit score can be different at each bureau. A great credit score includes five components.
Payment History

Payment history is the record of your payment frequency and missed payments. Bankruptcy, judgments and liens are included in this section. Timely payment is essential to maintaining a good credit score.

Amount Owed

The amount owed is the total amount of money owed to all creditors. This includes credit cards, personal loans, mortgages, car loans, student loans and other debts. Reducing amounts owed increases your credit score.
Length of Credit History

Your oldest credit account determines the length of your credit history. Credit bureaus consider a longer credit history a indicator of lower credit risk. A longer credit history contributes to a great credit score.
New Credit

New credit influences your credit score. Opening multiple accounts or making numerous credit inquiries in a short time can decrease your credit score.Limit credit applications; only apply for needed credit.
Types of Credit

The types of credit you use also impact your credit score. Using a variety of credit types can increase your credit score because credit bureaus believe this indicates a reduced credit risk.
Bottom Line

There is no one component of a great credit score. Each credit bureau calculates your score differently. Making payments on time, decreasing the total owed, limiting new accounts and using a various types of credit will increase your credit score.

Overview