Your credit score is a three digit number that will have a huge impact on your quality of life. This number can save you money or cost you money in high interest rates and down payments.

The credit bureaus use an equation to calculate your score. They do not release this equation to the public. They are scared that people will use that information to improve their credit score.

You would assume the credit bureaus would want people to have a good credit score. However the credit bureaus customers are the lenders. It is in the lenders interest for the borrower to have damaged credit. This way they can charge higher interest rates and earn a bigger profit.

These are the five influencing factors on your score. You will also find approximately how much each factor impacts your score.

1. Payment History (40%)

This is very important. On your credit report it reflects your credit limit, credit balance, minimum payment and payments received.

If you have a credit card that is always at the limit then this will hurt your score. But if you can make big payments on this account it can help your score.

This is also where negative listings will be taken into account. You should remove any negative listing on your credit report. This can be done by either disputing the listing with the credit bureau or settling the debt.

You should first try and dispute the mark and if that is unsuccessful then make arrangements to settle the debt. However make sure to get the creator of the negative mark to remove the negative item from your report in exchange for your payment. I suggest to getting this agreement in writing.

2. Ratio of Debt to Available Credit (30%)

This means are all your credit cards at their credit limit? How much credit do you have that is not being used?

Your score can receive a bump if you can show the bureaus that you have available credit. The best method of doing this is by keeping your credit card balance around 10% of the limit. This will help because it shows the bureaus that you use your credit and that it is used responsibly.

3. Pursuit of New Credit (10%)

How often is your credit run? If it looks like you are constantly having your credit checked your score will be lowered.

On your credit report is will show the frequency of your credit being run. So you should not be constantly making purchases using your credit or be trading in your car every couple of months.

However the threshold of this varies between credit bureaus. There are a certain number of inquiries that credit bureaus expect to find on your credit report.

Just try to avoid making a lot of purchases using your credit. There are people that switch phone plans and buy cars multiple times in a year and this will hurt your score.

4. Credit Experience (10%)

Do not worry about this factor. It only shows the purchases that you have made using your credit.

Meaning is your credit used to finance a mortgage, student loans, credit cards, auto loans, and etcetera. The more diverse your purchases the better however this factor will not make or break your credit score. Thus don't worry about this factor.

5. Length of Credit (10%)

How long have you been using your credit? Did you just get your first credit card?

This is another factor that you can not influence much and will not make or break your credit. If you are a newbie to the credit world you can still have a very high credit score.

In sum, only worry about the first two factors listed. However for your own knowledge the other three are looked at when your score is calculated.

If you take care of the first two factors then your score will be high. With a high score you can take advantage of rewards, automatic approval and save thousands with low interest rates.