Confused about credit scores? You are not alone. A recent study by the Consumer Federation of American found that 40 percent of consumers knew little or nothing about how scores are calculated or used.
Whether your goal is to establish credit, repair damaged credit, or boost your credit score, the first step is to understand factors that influence your credit score. Otherwise, the actions you take could do nothing at all or even damage your credit.
Your credit score ranges from 350 to 850. It is a snapshot of your credit worthiness derived by a mathematical formula from information in your credit report. The higher the credit score is, the less likely the person with that score is to miss payments or default on a loan.
There are three major credit reporting agencies: Equifax, TransUnion, and Experian. Federal law entitles you to receive a free copy of your credit report every 12 months from each Credit Reporting Agency. Georgia residents are entitled to two additional free credit reports from each provider. Obtain your free credit report by calling 1-877-322-8228 or by visiting annualcreditreport.com.
Five factors go into determining your credit score:
• Payment history
• Credit utilization
• Length of credit history
• Types of credit
• New credit or credit inquiries
Your payment history is the most significant factor in your credit score, accounting for more than a third (35 percent) of your total score. Payment history shows how you have made payments for any credit cards, loans, and any other liabilities. For each account, your credit report shows payments made on time and highlights payments that were more than 30, 60, 90, or 120 days late. Even one late payment negatively impacts your credit score, and will remain on your credit report for seven years.
Credit utilization accounts for nearly a third (30 percent) of your credit score. This is NOT how often you use your credit card! Rather, it is an indication of your available credit. Maxing out your credit cards hurts your score. In fact, using more than 30 percent of your available credit will cause a small drop. For example, if you have a credit card with a $10,000 credit limit, an outstanding balance greater than $3,000 would hurt your credit score.
Your payment history and available credit account for almost two-thirds (65 percent) of your credit score. Keeping credit card balances low and making your payments on time has a big positive impact on your credit score.
Length of credit history accounts for 15 percent of your total score. The sooner you establish credit, the better. The longer your credit history, the higher your credit score. Paying off liabilities will positively impact your score, but keep available lines of revolving credit (credit cards) open to increase the length of your credit history.
The types of credit you use account for 10 percent of your total score. The right kinds of credit, such as a major credit card or two, a mortgage, and an installment loan (such as a car loan) will help your score. Lenders generally do not like to see too many lines of credit. Having lots of retail store cards or finance company loans will lower your score.
New credit and inquiries determine the last 10 percent of your credit score. Applying for a new credit produces a hard inquiry on your credit report. More than one a year is likely to adversely affect your score. Avoid applying for new credit if you plan to apply for a loan in the near future. The drop in your credit score could affect the rate you receive on a mortgage or auto loan, causing you to pay more interest in the long run.
To establish or rebuild your credit score, pay attention to these five items. Focusing on these for six months and you could greatly increase your credit score. The benefit to raising your credit score is lower interest rates, lower payments, and more money saved over the long run.

Mitzi Parker is Sumter County Extension agent/Family and Consumer Science, University of Georgia Cooperative Extension Service. Contact her at 229-924-4476.