Criteria for Credit Evaluation

There's no way to predict exactly how various financial factors affect consumers' credit ratings. However, creditors and lenders use similar methods to evaluate people's creditworthiness. The amount of debt consumers have and whether they pay their bills on time are just two factors that have a big impact on credit evaluations.

Payment History

Credit card issuers and lenders consider several factors when they evaluate a person's creditworthiness, including employment history. However, credit scores also weigh heavily on decisions to approve or deny credit and loan applications. Payment history usually has a big impact on people's credit ratings because it makes up the biggest portion of their credit scores. For example, payment history affects 35 percent of the FICO credit score. Furthermore, banks and credit card companies scrutinize credit reports to determine whether loan and credit applicants pay other lenders and creditors on time.

Debts

Creditors and lenders look at how much of your available credit you're using. The less you use the better, because the amount of debt you have affects 30 percent of your FICO credit score. You risk significantly lowering your score if you keep your credit card balances close to their limits or you exceed the limits. It's also best to avoid opening several new accounts in a short period because the number of new accounts you have affects 10 percent of your FICO score. People who open several new credit or loan accounts at one time appear to lenders and creditors to be at risk of accumulating large amounts of debt.

Credit Management

Fifteen percent of your FICO credit score is pulled up or down by the length of your credit history. Creditors and lenders view longer credit histories more favorably than shorter ones. However, it's important to use a credit card and pay off the charges on a regular basis to show you can manage credit responsibly. Holding on to a credit card and not using it won't help your credit rating. The type of accounts you have affects another 10 percent of your FICO score. For example, well-managed bank credit cards tend to do more to bolster a credit score than retail store credit cards.

Considerations

The Fair Isaac Corporation created the FICO scoring model. According to Fair Isaac, no factor that affects credit scores has the same impact on people's credit ratings because credit histories vary. Therefore, evaluations by lenders and creditors are unpredictable, and credit scoring varies as well. In any case, people can bolster their credit ratings by paying their bills on time, maintaining low credit card balances and paying down or paying off debts.