Your three digit credit score is a very important number in your financial life. This number determines if a lending company will extend you a loan or not. It will also determine the type of loan terms and interests that will be given to you. The higher your score, the better terms and lesser interests. Hence, if you want to save up on thousands of dollars of interest payments you better make sure that you have a good credit score.

According to some, credit bureaus break down your credit score into five categories. These are your payment history – about 35%, total amounts owed – 30%, length of credit history – around 15%, type of credit and new credit which are both about 10% each.

Your payment history constitutes the largest percentage of your credit score. This is obvious because it is in your payment patterns that the lenders can see how you use your available credit and how you pay them as well. With this, it is rightful to claim that the most important rule of keeping a good credit score is to pay your bills on time. This is an indication of your character as a paying customer. Therefore, you should avoid paying late because long overdue payments can appear on your credit report and can harmfully affect your score.

The total amount that you owe also plays a big factor in your rating. The second most important rule in maintaining accounts is to keep your balances low. Credit cards that appear to be close to reaching its limit can also negatively affect your credit. Hence, you should always work on keeping that balance low. If you have a lot of credit cards, it is best to distribute your debts to as many cards as possible. It is better to have small balances on your different credit cards than have a single card with an almost maxed out credit while other cards have zero balances.

There are times when you have to close credit accounts. In doing so, do not close your oldest account even if it means opening more new accounts. Without the old account, your newer accounts will make you look like you’re a newbie in using credit accounts. Remember that the longer you use credit accounts, the higher credit score you will get.

Another thing to remember is to open accounts only when necessary. Do not open new accounts with just the thought of increasing your available credit or just because a retail store will give you 10% discount on their items. Having many accounts can actually lower your score. It will make you look like your shopping for credit only. In addition, shop for a new loan or a credit card for only a short period of time. Your inquiries can make your score lower by making you look like your shopping for the best and most affordable loan or credit.

It might look like you have to do a lot of things to be able to have a good credit history and score but all these things are worth it if you can save thousands of dollars and reap other benefits that you can get from a high credit score.