The calculation of a credit score is a very complex process, in which some things do not matter and other things are much more significant than you previously thought. The exact calculation used to determine your credit score is guarded a secret. Still some patterns have emerged which provide hints to the mystery of calculation based upon the whims of big-wig financial gurus. Unluckily, these calculations are not stable and it is not that easy to understand why or how they change. This leads to the great variety of myths emerging around the credit score. That is why it is primarily important to base your actions on the most updated information.

Negatives to Your Credit Score

Bankruptcies, foreclosures, and tax liens are considered to be the biggest negatives to a credit score. Each can reduce your score by 200 points or even more.

• Worst of all is a tax lien because if you do not pay it duly, a tax lien will stay for 10 years, but if you don't pay at all it will hang around for 15 years. However, if you pay a tax lien on time, it just stays for 30 days.
• The easiest to recover from are bankruptcies. They only hang around on your report for 10 years.
• Foreclosures stay for seven years but reduce your chances of obtaining a loan more dramatically if compared with bankruptcy.

So, try to avoid these situations at all costs.

Credit Score Myths

• My credit score improves if I pay my bills on time. It is not true to fact. Paying that electric bill on time every time won't do a thing for your credit score. The only thing bills can do to your credit score is harm it if you don't pay on time. The electric company is entitled to report your delay in payment to a credit bureau. Your other outstanding debts can also worsen your credit history.
• Every credit request inquiry hurts my score. That is false. In fact, employer and personal credit request inquiries don't harm your credit score at all. Your credit score is slightly reduced only when creditors and lenders put in the request. Remember that the information concerning your income and employment history often used by credit-grantors, though it is not included in your credit report.

Positives to Your Credit Score

It is believed that a balance on your credit card is undesirable for you when you want to be awarded a loan. However it is actually a good thing. The trick is to keep your balance lower than 30% of your total available credit line every month. Try to keep you balance closer to zero and your score will see an increase. Remember, however, that a zero balance is just as bad as a balance over 30%.

How long you have the same credit cards and other credit-based accounts also affects your credit score. Your score will increase if you use the same credit card for a long period of time.

To put it clear, those big financial gurus are trying to make an accurate system to estimate your credit-worthiness. All the rules and calculations are designed for making your actions to seem solid, static, and simple. Just think for yourself what would make good business sense to a lender, and helping your credit score will become second nature.