6 secrets to a better credit score

A credit score plays a big role in your daily life. It can determine the interest rate a consumer is going to pay for credit cards, car loans and mortgages — or whether they will get a loan at all.

The three-digit number is designed to predict risk — specifically, the likelihood that you will become seriously delinquent on your credit obligations or default.

While there are many credit scoring models, one dominates the market — the FICO credit score.

A FICO score is comprised of five major factors, although some are weighted more heavily than others, such as payment history and debt owed. Here's the breakdown:

  • Payment history: Your account payment information, including any delinquencies and public records.
  • Amounts owed: How much you owe on your accounts. The amount of available credit you're using on revolving accounts is heavily weighted.
  • Length of credit history: How long ago you opened accounts and the time since account activity.
  • Credit mix: The mix of accounts you have, such as revolving and installment.
  • New credit: Your pursuit of additional credit, including credit inquiries and the number of recently opened accounts.

With that, there are a few simple things you can do to get your finances on track, according to Rod Griffin, director of public education for Experian. Here are his six ways to better manage your credit and improve your score:

  • Pay your bills on time, every time. Delinquent payments and collections have a major negative impact on your score.
  • Keep balances low on credit cards and other revolving credit.
  • Apply for and open new cards only as needed. Opening additional accounts to have a greater credit limit won't significantly improve your score.
  • Don't close unused credit cards. Doing so may actually lower your score.
  • Protect your credit information from fraud and identity theft.
  • Check your credit report for accuracy. You can get a free report from each credit reporting company annually at annualcreditreport.com.

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