Your credit score is critical when obtaining credit these days, yet many people are unclear about what makes up their score. Credit scores range from 300 to 900 with most mortgage lenders requiring a minimum of a 680 score. Many factors go into your score but the 2 largest contributors are how you make your payments and how much of your available credit you are using.

The first is easy; make your payments on time and your score goes up; have late payments or collections and your score goes down. Any late payments stay on your bureau for years and continue to impact your score.

The second item is a surprise to many. I am often told by clients that they were advised by their bank to make sure they use their credit card often to help build credit. This is not great advice because the second largest contributor to your credit score is what your balances are compared to your limits. For instance, if you have a $1000 limit on your credit card and have a $700 balance on the day that the credit card company reports your account to the credit agency, you are actually lowering your credit score. They call this utilization.

The more you utilize the credit you have available to you, the lower your score goes, even if you never miss a payment and pay off your balance every month on time. The good news is next month when your account reports again and your balance is low (below 50%) then your credit score will climb and your score is not affected by the previous months' high balance.

So make your payments on time and use auto-pay whenever possible to avoid human error causing late payments. Keep your monthly utilization of any revolving credit (lines of credit and credit cards) below 50% of the limit and your credit will be an asset and not create a challenge the next time you apply for credit.