Based on the information in the credit report, a number is created that summarizes your creditworthiness and how much of a risk you could be to a lender. Usually a number between 300 and 900, the score is generated from the information in the report. The lower the score, the greater the risk; the higher the score, the more creditworthy.

Ranked from most important to least important, the number is determined from the following:

Payment History
The timeliness of your payments, bankruptcies, bills sent to collection agencies, and late payments. As time passes, the weight of the negative impact decreases – the more recent the more your score is lowered.

Outstanding Debt
The amount of debt you owe currently. Large balances, having many credit cards, and maxed-out limits will lower your score.

Established Credit Length
The longer you’ve had established credit, the more your score improves. As your credit report gets longer through the years, lenders see that you have a history with patterns.

Inquiries
As you have more inquiries into your credit history, it shows that you rely on credit, and your score lowers. Having a great number of inquires can indicate you have financial problems.

Current Credit
The types of loans (credit card, line of credit, etc.) and available credit you have now affects your score if there isn’t enough information from the other items listed above.

The best credit score possible is a score of 820, however only a very small percentage of the population actually achieves this score. Avoiding negative items on your credit report won’t necessarily give you maximum points. Some items add to your score, some things decrease it. Even if two people made identical purchases and repaid them at the same time, they could have different credit scores if one had established credit longer than the other.