Consistently paying bills on time is a very important factor considered with your FICO Score. On-time payments can have a positive impact on your FICO Score over time, while a history of late payments can have a negative impact. The more recent the late payments occurred, the greater the impact they will likely have on your FICO Score. As late payments age, their effect on your FICO Score will gradually lessen.
Bottom Line: Paying ALL bills on time can positively affect your FICO Score over time
Whatever you do, DO NOT pay your collections. Creditors will have you thinking paying off your collection will increase your credit score, however this will not change the status on your report and will not increase your score.
Closing an account may seem like the right thing to do, however this is wrong. It's important to understand that it can adversely affect your credit score. Before you close your account, consider taking a look at your credit report to see where you stand and make sure that closing the account won't leave you with a credit history that's too thin or too new. While the negative effects of closing a credit card account are usually temporary, it might be worth keeping a long-standing account open if you're able to.
Keeping your credit card balances in check is an important piece of the credit puzzle. If you want to improve and maintain a good credit score, it’s more important to keep your balance at or below 30% of your credit limit, even lower if possible! This is to increase your score and show creditors how financially responsible you are.
This factor looks at what types of credit you have, including car loans, mortgages, and credit cards. This factor accounts for the remaining 10-percent of your FICO score. An ideal credit mix includes a blend of revolving and installment credit. An easy way to use revolving credit is to open a credit card and pay your bill on time every month. Ideally, charge only what you can pay off every month to avoid interest. If you don't have an installment loan and only have credit cards, consider opening a small personal loan or other types of secured loan. This will demonstrate your ability to manage different types of credit.
FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).