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FICO is launching a new scoring model this summer, called the FICO Score 10. The new model will take into account a consumer's account balances and missed payments over the last two years. About 40 million consumers will see their scores drop as a result

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What can you do to manage your credit The most important thing you can do to keep your credit healthy is to check your credit report every 6 12 months. Regular credit checks help you to spot inaccuracies and signs of identity theft before they cause major financial damage. Keeping your credit reports healthy and positive can help you save thousands on life’s big purchases.

Setting your financial goals Your financial goals serve as a beacon to you and keep you on course. You’ve heard the saying If you don’t know where you’re going, any road will take you there. Well, if you don’t have clear objectives when it comes to how you want to spend and save your money, you risk veering off on that rocky and perilous path to bad credit. Your goals whether as grand as starting your own business or as modest as buying a new refrigerator help you keep your eye on the horizon and guide you to your destination.

Your FICO score is made up of five components Paying on time (35 percent): Payment history is considered the most significant factor when determining whether an individual is a good credit risk. This category includes the number and severity of any late payments, the amount past due, and whether the accounts were repaid as agreed. The more problems, the lower the score. Amount and type of debt (30 percent): The amount owed is the next most important factor in your credit ...score. This includes the total amount you owe; the amount you owe by account type (such as revolv- ing, installment, or mortgage); the number of accounts on which you’re carrying a balance; and the proportion of the credit lines used. For example, in the case of installment credit, proportion of balance means the amount remaining on the loan in relation to the original amount of the loan. For revolving debt, such as a credit card, it would be the amount you currently owe in relation to your credit limit. You want a low balance amount owed in relation to your amount of credit available. Having credit cards with no balances ups your limits and your score. The length of time you’ve been using credit (15 percent): The number of years you’ve been using credit and the type of accounts you have also influence your score. Accounts that have been open for at least two years will help to increase your score. The variety of accounts (10 percent): The mix of credit accounts is a part of each of the other factors. Riskier types of credit will mean lower scores. For example, if most of your debt is in the form of revolving credit or finance-company loans, your score will be lower than if your debt is from student loans and mortgage loans. Also, the lender will give more weight to your performance on its type of loan. So, a credit-card issuer looks at your experience with other credit cards more closely and a mortgagee will look pay closer attention to how you pay mortgages or secured loans. An ideal mix of accounts will have many types of different credit used. The number and types of accounts you’ve opened recently, generally in the last 6 months or so (10 percent): The number of new credit appli- cations you’ve filled out, any increases in credit lines requested by you (unsolicited one’s don’t count) and the types and number of new credit accounts you have will affect your credit score. The reasoning here is that if you’re applying for several accounts at the same time, and you’re approved for all of them, you may not be able to afford your new debt load. See more

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Strategy 2. Amount you owe: The balance on your accounts is 30% of your available credit score. So, using all your credit will worry lenders and hurt your score. The lower your balance is, the better your score. You want to keep your balances around 7% to 10% for each account. Also, if you make a big purchase and want to maintain the 10% balance level, make sure you pay off your purchased item before your bill cycles. If you pay after the cycle, the lender will report your high balance. Action tip Any extra money should go towards your balances.

here is your first Top Credit Score Improvement Strategy. Payment history: Your paying habits contribute 35 % of your credit score. If late payments are recent, it will lower your score more than if you were behind in the past. In addition, a 90-day-late indication will severely damage your score over a 30-day mark. Also, public records like tax liens, judgments, and bankruptcies fall into the same category and could take your score down even further, so make sure you are current with the creditors and always pay your bills on time. Action Tip: Study your credit report and dispute inaccurate accounts.