Elements of a Credit Report.

The credit report has five main elements: inquiries, mix of credit, payment history, amounts owed and account age. Each contribute to your credit score at a set amount, given by the percentages below.

Inquiries: 10%

Mix of credit: 10%

Payment history: 35%

Amounts owed: 30%

Account age: 15%

Account Age

Account age, or length of history, is the amount of time you have been using your credit for. The longer the better. The idea is that creditors can better judge your history if they have more information, which they get from you having a longer history.

The biggest tip to keep this portion of your score high is to keep your oldest accounts open if you can. So, keep that credit card you got freshman year of college around (as long as it does't have an annual fee).

Amounts Owed

Amounts owed, also referred to as debt utilization, is the amount of your credit limit you are currently using. In general, the more you are using the worse it looks.

Many people want to know how much of their credit limit they can use before it starts to make them look bad to creditors. However, this is a complicated questions as experts disagree. Some say you, ideally, you should stay as low as 5% of your credit limit, others say 30% or less is okay. As a general rule, try to keep your credit used as low as possible, but don't start worrying about it until its more then 20% of your credit limit. 

Payment History

Payment history contributes the most to your credit score, so pay close attention. Payment history refers to your record of paying off your credit. It can be impacted by:

• Number of accounts you are late on.
• Number of times you are late on one account. 
• How late you are on one account. 

Mix of Credit

Mix of credit, also known as account mix, refers to having different types of credit. For example, having a credit card and a student loan, rather than just a credit card, will increase your score. 

Lets take a look at the different types of credit:

• Installment Credit: When you receive money or something of value (like a car) in exchange for a promise to repay in installments. This includes car loans, student loans, home loans, etc.
• Revolving Credit: This is credit that "revolves" when you pay it down. For example, with a credit card, your available credit revolves back to its original value when you pay off your bill. This type mainly includes credit cards. 
• Mortgage: While home loans are installment credit, they count in this area too.
• Open Credit: This type of credit has no limit, but you must pay its balance at the end of the billing period. This mainly includes charge cards. 

Note: While having a mix of credit will help your credit score, not having a mix won't hurt it. So don't go out and get a new loan just to help you in this category. 

Inquires

Inquiries occur anytime someone looks at your credit report. There are two types of inquiries:

• Soft inquiries: when you or someone else looks at your credit report for a purely informational reason, it counts as a soft inquiry. This might occur when you look at your own credit report or when credit card companies look at it to pre-approve you for a card. Soft inquiries do not impact your credit score. 
• Hard inquiries: when someone looks at your credit report because you are asking for money. Examples of this occurring include the bank looking at your report when you are asking for a home or car loan. Hard inquiries do impact your credit score. 

Lets look more closely at hard inquiries:

Optimally, you should limit your hard inquiries to 5 to 6, as each one takes about 5 points off of your credit score. Luckily, three things work in your favor:

• Inquiries only stay on your report for two years. 
• If you make multiple mortgage inquiries within four weeks it only counts as one inquiry. This means that when you are shopping around for the best home loan you should try to do it within the time span of four weeks. 
• If you make multiple car loan inquiries within two weeks it only counts as one inquiry. This means that when you are shopping around for the best car loan you should try to do it within the time span of two weeks.