When most of us think of scores, we think of the relatively straightforward systems used in sports or in school tests. You get points for certain actions, behaviors, or answers; and those are totaled to determine your score.

Credit scoring isn't nearly so easy. Credit-scoring models use multivariate formulas. That basically means that the value of any given bit of information in your report might depend on other bits of information.

To understand how this works, let's use a noncredit example. Say that your sister calls you to report that her husband is more than an hour late in coming home from work, and she asks if you think he's having an affair. To answer the question, you would need to review what you know about this man, including …show more content…
There's one thing that's always true, though: The FICO model is set up to place more value on current behavior than on past behavior. That means that the effect of your old credit troubles lessens over time if you start handling credit more responsibly.

It's generally a lot easier to lose points on your score than it is to gain them back, which is why it's so important to know how to improve and protect your score. Now that you understand in general how credit scores are calculated, we can move on to some specifics. The following are the five main factors that affect your FICO score according to their relative level of importance.

1. Payment …show more content…
A payment that's 30 days late isn't considered as serious as one that's 60 or 120 days late. Collections, tax liens, and bankruptcy are among the biggest black marks.

2. The Amount You Owe

This equates to 30 percent of your score. The score looks at the total amount on all accounts (credit card, auto loan, mortgages, and so on). Most Americans use less than 30 percent of their available credit limits, according to Fair Isaac. Only 1 in 7 uses 80 percent or more of available limits.

As you might expect, using a much higher percentage of your limits will worry lenders and potentially hurt your score. People who max out their credit limits, or even come close, tend to have a much higher rate of default than people who keep their credit use under control.

3. Length of Credit History

This is 15 percent of your total score. As such, it's generally much less important than the previous two factors, but it still matters. You can have a good score with a short history, but typically the longer you've had credit, the better. The average American's oldest account has been established for about 14 years, according to Fair Isaac. One in four has an account that's been established for 20 years or