Max Out Your Credit Knowledge

Why?

"People have more flexibility with borrowing and repaying money to revolving accounts, so their activity on those accounts is more indicative of their money habits and more predictive of future behavior," he said. "Installment loans require payment of the same amount month after month, so while that activity is predictive, it isn't as valuable to FICO scores as activity on revolving accounts."

Now what if, on occasion, you max your card, or come close, to make a large purchase? Sometimes I do this if I'm buying a household item such as a couch. I pay the bill off the next month, but the purchase can take me close to my credit line.

Well, your score will recover fairly quickly once the credit report reflects that the card bill has been paid down, Watts said.

Keep in mind, he added, that your credit score is based on what's reported in your credit file the moment that the score is calculated. So it may be a few days or weeks before you see your score increase after paying off your bill.

And exactly how much does maxing out hurt your score?

About 30 percent of a typical person's credit score includes the following factors:

· Amount owed on accounts.

· Amount owed on specific types of accounts.

· Lack of recent account activity. (This may mean that you have no open revolving accounts, that you haven't used a revolving account in a while, or that your balance information is not being reported.)

· Number of accounts with balances.

· Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).