Credit scores are calculated through complicated and proprietary algorithms that differ among scoring agencies. However, there are generally three major pieces.
The most important: your bill-paying history. It accounts for as much as 35% of your total score. Pay all your bills on time. Even if it's just the minimum payment, make sure that bill is marked paid on the designated date, or sooner.
Next, your "utilization rate," or debt-to-available-credit ratio, counts for about 30% of your score. Mr. D'Arruda says his is usually about 10% to 15%. Creditors don't want to see the ratio over 30% and consider it an important sign of your financial acumen and any money challenges you are facing.
"You don't need a lot of credit cards to have a good utilization rate," says Barry Paperno, consumer operations manager for myFICO.com, the consumer arm of credit scorer FICO. "Obtaining 25 credit cards for your score is overkill. Utilization looks at percentages more than dollars."
If you have $300,000 in available credit and a $30,000 balance, your utilization rate is 10%; if your available credit stands at $3,000 and you owe $300, your utilization rate is the same.
Be wary of your per-card rate, too. If you have a credit card with a $5,000 limit and you charge $4,750 for a home-theater system, your utilization rate on that card may set off alarms.
"It's a good idea to try to keep the balance on each card under 30% of the limit," says Steven Katz, senior director of operations for credit-management company TransUnion.
Having access to credit but not using it won't improve your score, but that doesn't mean you have to carry a balance each month. You simply need to use the card and pay it off to maximize your credit score.
"The ideal place to be is under a 10% utilization rate but over 0%," FICO's Mr. Paperno says. "There needs to be some kind of recent activity" to activate a score.
Your credit mix and history contribute about 15% to your score. Creditors like to see how you handle revolving credit, or credit cards, and installment loans, like mortgages and car and student loans. They average the age of the account divided by the number of accounts.
Opening new accounts can affect about 10% of your score. "Taking on new credit has been shown to indicate a higher level of risk," Mr. Paperno says. "People who go into default tend to have added new credit more recently than those who haven't."
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