About Credit
In the United States, a credit score is a number that is based on a statistical analysis of a person’s credit report, and is used to represent the creditworthiness of that person- the likelihood that the person will pay his or her debts. A credit score is primarily based on credit report information, typically from the three major credit bureaus (Equifax, Experian, and TransUnion). All credit scores are not the same because each bureau uses it’s own scoring mechanism.
Credit scores measure the risk of default by taking into account the various factors in a person’s financial history. Here is how these scores assess what is on your credit report.
1. Your payment history- about 35% of your score. Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score.
2. How much do you owe- about 30% of your score. The scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.
3. Length of your credit history- about 15% of your score. A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.
4. New credit- about 10% of your score. If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. The scores can distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your score.
5. Other factors- about 10% of your score. Several minor factors also can influence your score. For example, having a mix of credit types on your credit report- credit cards, installment loans such as a mortgage or auto loan, personal lines of credit- is normal for people with longer credit histories and can add slightly to their scores.
Tips for building credit 1) Check your credit report. You’re entitled to a free annual look at your reports from annualcreditreport.com. 2) Establish a checking and savings account 3) Pay your bills on time. 4) Don’t max out your credit cards. Keep your balance no more than 30% of your credit limit. 5) Apply for credit when you are a college student. 6) Piggy back on someone else’s good credit. 7) Apply for a secured card. 
Get a store card. 9) Get an installment loan.
When using your credit cards- Keep balances low (no more than 30% of your credit limit). Don’t charge more than you can pay off in a month. You don’t have to pay interest on credit card to get good credit scores. It’s much smarter to pay off your credit cards in full each month. Use your card regularly. Make sure that you pay all your bills on time.
Patience and caution are important in this process. It takes time to establish credit . Most importantly, remember that credit actually represents real money and has to be repaid with interest.