Credit (FICO) scores are the basis of how we obtain credit to purchase products and services. Whether you're applying for a new credit card or requesting a new loan for a major purchase such as car or home requires an acceptable credit score. The higher your score the more favorable your interest rate will be. Lower credit scores demand more interest paid on a loan.

If your goal is to save money wherever you can then you should review your credit score on a regular basis. No matter your score, you should request a copy of your complete credit report at least yearly. This will give you the opportunity to compare current reports, evaluate and make corrections as needed. This process gives you the opportunity to correct problems as they may develop.

The Four Components OF Your FICO

Your credit score is influenced by:
Payment history
The amount of money you owe
Your credit history (timely payments)
Number of new accounts opened

Each component of your credit score is weighted as a percentage of importance to your over all score. Adjustments can be made to the area of your score that is most affected.

35% of your credit score is determined by payment history.

There are often times when emergencies come up that may alter your ability to pay on a timely basis. This could be by way of illness, accident, and loss of work. The key to maintaining an acceptable credit score is when faced with one of these situations immediately communicate with all your creditors. Do what you can to work out any arrangements possible with them for an alternative payment plan.

If you haven't paid an account within 90 to 120 days your account will most likely be turned over to a collection agency and your credit score will be automatically lowered and will maintain that score until that account is cleared. Any accounts turned over to collections will have serious impact on your credit score.

30% of your score is determined by the amount of money you owe.

The balance you own on your credit cards does affect your score. The more you pay the more favorable your score. If you max out several cards and are paying only the minimum amount due then you'll be considered a credit risk.

One of the easiest ways you can raise your credit score is simply by lowering the amount of debt you owe. The higher the balance you have and the more cards you have a high balance the higher the risk you become which will lower your credit score.

Here's a tip on how to keep your credit score high. Whenever you pay off an account, don't close it. Keeping it open will help your credit score.

15% of your credit score is determined by the length of time of your credit history.

A person who is trying to establish their credit will be considered a higher risk than a person who has established one over time.

The best advice for those wanting to develop a credit history is to apply for a credit card and use it wisely. Any purchase you'd normally make by check or debit card should instead be made with your credit card. Subtract each transaction you made with your credit card form your checking account balance. When your credit card payment is due, use the money you deducted form your check register to pay your card to a zero balance. The key to this is to be sure and pay the credit card off each month. By doing this you are establishing a credit history that is favorable to the credit agencies.

10% of your credit score is determined by new accounts opened.

There is no need to try and keep up with the Joneses and apply for every credit card application you receive in the mail. Keep your credit cards to the absolute minimum. Credit agencies will compare the number of credit cards you have to the amount of open balance on each card. It is always better to maintain a low number of credit cards. Credit cards are best used for emergencies only. Several requests for new credit cards in a very short period time will lower your credit score before you even use them.

10% of your credit score is determined by types of credit used

Your credit card score is devised by a numbering system based on the number and types of credit accounts you have. $100,000 of debt can be evaluated differently based on the type of debt occurred. A debt of $100,000 for a house compared to a debt $100,000 of credit cards is scored better.

Credit is an instrumental part of our lives. Abuse at and you'll lose it. Build it will grow. The importance of reviewing your credit report on a regular basis is imperative and should not be taken lightly.