Your credit score is extremely important, as it determines your eligibility for all kinds of financial endeavors, such as credit cards and home loans. However, some people have difficulty adjusting their credit scores because they are not sure what the number is based on. Knowing what criteria go into the number on your credit report can help you maintain a good credit score and qualify for higher limits and better rates on your loans.

A credit score may be anywhere from 300 to 850, with 300 being the most risky and 850 the most secure in the eyes of lenders. Therefore, a higher number will qualify you for a better loan. A person with a credit score under 500 is unlikely to be able to secure any type of loan.

The Fair Isaac Corporation, or FICO, which determines your credit score, uses a specific formula to come up with the number on your credit report. Being aware of this formula can help you keep an eye on your credit. The most important factor is paying your bills on time, which accounts for 35% of your credit score. The longer you pay your minimum balance on time for each credit card or loan that you have, the higher your credit score will be. Since this factor accounts for the largest portion of your credit score, this should be your main priority.

The difference between your total credit limit and total amount owed is the next most important factor in your credit score, making up for 30% of the total. The less credit you use out of the amount you have available, the better you will look to the credit bureaus. It's a good idea not to charge more than 50% of the limit on each of your credit cards.

The length of your credit history accounts for 15% of your credit score. For this reason, cancelling credit cards can hurt your credit score. If you do not want to use a card anymore, cutting it up without canceling the account will result in a better credit score. However, if you are being charged a monthly or annual fee to keep the account open, canceling may be the better option.

The remaining 20% of your credit score is equally divided between your new accounts and applications for credit and the diversity of credit types you have. Too many new accounts and applications at one time result in a lower credit score, while diversity of credit types makes for a better credit score. A mix of credit cards, retail cards such as a Macy's card, and loans that you pay in regular installments will help boost the last ten percent of your credit score.