Significance

• Your credit rating is checked every time you apply for a loan, or some kind of credit, such as a credit card. The higher the number, which can range from 300 up to 900 points, the better will be your ability to get the credit you want, and good terms such as larger amounts and also longer terms of repayment. A score of 700 is considered to be very good.
  
  Your credit rating will be slightly different with each of the big three credit reporting agencies--EquiFax, Experian, and TransUnion. Each company has its own numbering system and different formulas for calculating the credit score, but all use the idea that higher numbers are better. The three companies came to an agreement in 2006 and are producing a unified credit scoring system called VantageScore. It ranges from 501 to 990 and also has a letter grade attached, with an "A" for scores ranging between 901-990.
  
  

Function

• Credit can affect your credit score in negative and positive ways, depending on the other situations that are also reported. For instance, having a lot of other credit cards can affect your credit, says the Experian Website, if you have large amounts of credit that you could use. An ideal ratio, they say, is to keep your actual debt at about 25% of the available credit. When it is higher than that, you will find that lenders are less likely to extend much new credit to you.
  
  

Effects

• Every time some form of credit is applied for, it is reported on your credit report. The exception to this is when they are all close together. This means that you can fill out many applications finding the best deal for a credit card, or loan, within a period of a month, and it will only appear as one credit inquiry.
  
  

Considerations

• Since your transactions are visible on a credit report, there are some things you do not want to do to try and raise your credit score. This includes trying to raise your credit amount by opening a lot of credit cards, or by closing out credit card accounts.
  
  Lenders who look at credit reports all day can see what is going on. In addition, a credit history is based on the longest account that is open. Closing it will shorten your credit history after a while, and this can adversely affect your credit score.
  
  

Warning

• Experian warns that it is better to pay down your debt rather than to move it around from one credit card to another. Opening new credit cards can change your debt-to-credit ratio and affect it negatively.
  
  

Prevention/Solution

• One of the best ways to raise a credit score, says Experian, is to pay your bills on time. This takes time to affect your credit score, but is well worth it in the long run, providing the better score that is needed for better credit terms later on.