Credit scoring is based on 5 major factors of which only 4 are actually scored.
35% Payment History
30% Types of Credit Used
15% Length of Credit History
10% New Credit
Under the Equal Credit Opportunity Act credit scoring may not use gender, martial status, national origin, race or religion as factors.
Payment history: 35 percent. The single most important thing you can do is the simplest: Pay your bills on time. More than a third of your FICO score is based on your payment history: how often you're late paying credit cards, car loans, mortgages and student loans. The later you are, the more you hurt your score. And closing an account with late payments after you've paid it off doesn't get rid of the damage to your score any faster than leaving it open.
How much you owe: 30 percent balance owed. The next biggest chunk of the score is based on how much you owe. The simplest solution is to pay down on your credit cards and other installment loans. Moving money from one card to another won't help you have to reduce the overall balance. Credit issuers also look at how much of your borrowing power you're using. Even though you're keeping up with monthly minimum payments, if you're at your limit on one or more cards, you're at greater risk of getting in over your head, which will likely be reflected in your score. On the other hand, if you can get your bank to raise your limit, the extra headroom on your account should help your score.
Length of credit history: 15 percent. Lenders want to see a track record of timely payments. Even if you have had credit for a long time, a lot of newer accounts will lower your score. That's why closing old accounts may reduce your score. If you're just getting started, stick with one or two accounts and gradually add more. If you have no credit history, you may want to start with a secured loan or credit card. By keeping money in a savings account with the same lender and using it to back your loan, you'll lower the risk to the lender, get a better rate and start building a good payment history.
New credit: 10 percent. Opening up a lot of accounts all at once can also hurt your score, even if you pay all your bills on time and don't carry big balances. You may also hurt your score if you're constantly changing cards and chasing a lower rate. Your score can also take into account how many inquiries lenders make to credit agencies asking about your credit. Too many request for information may mean you're embarking on a borrowing binge. On the other hand, Fair Isaac says it doesn't count inquiries from lenders who want to pre-approve you for credit without your approval, according to the company's website.