Sponsored: 5 big things that impact your credit score – and how to repair it

What’s so important about your credit score?

Everything.

A high credit score turns strangers into friends ready to issue you a loan at a lower rate, rent you that cool apartment, and offer you a satisfying new job.

A low score, however, could taint your reputation with doubts about your financial stability and personal indulgences, costing you more to borrow money or to get insurance, and closing doors to housing and employment opportunities. No amount of charm, talent, or feats of strength can whitewash credit scores.

Credit scores are an algorithm first developed in the 1960s by the Fair Isaac Corp., a California-based analytics software company that produces the FICO® Score, the standard measure of consumer credit risk. FICO reports that businesses ordered more than 10 billion FICO scores last year, which was used in 90 percent of all consumer lending decisions in the United States.

There are five things that FICO and the experts at STCU say can affect your credit score:

1- Payment history. Your payment history can include everything from library fines, cell phone payments, child support, and medical debts.

2- Amounts owed. The credit bureaus compare how much of your credit limit you borrow on credit cards and other revolving credit. A so-called utilization rate that exceeds 30 percent will drive your credit score down.

3- Credit history. Your practice of consistently paying back debts over time demonstrates an ability to repay.

4- New credit. Checking your own credit history will not affect your credit score, but applying for a credit card or loan may lower it, particularly if you make several applications in a short period of time.

5- Types of credit. Maintaining a variety of accounts – mortgage, car loan, credit cards, and so on – can affect your credit score positively.

If you are late making a payment one time and you quickly get that bill paid, it should not affect your score. But bankruptcies, delinquencies, collections, charge-offs, judgments, and unpaid tax liens can haunt your credit report for years and often account for huge reductions in your credit score. For instance, a payment that’s 30 days late may reduce your score by 40 to 110 points, but a bankruptcy may drop the score by 130 to 240 points.

Not all is lost, however. Learn more details about each of these five factors, six of the best ways to go about repairing your credit, and how to order your own free credit report at stcumoney.org.