Understanding the in’s and out’s of your credit score can seem confusing, but you shouldn’t let the details remain a mystery. Because your credit report can determine your financial future, it’s important that you realize how you can maintain the best credit score possible. So to help you better navigate through the world of credit, the following answers some the most commonly asked credit related questions.

How is my credit score calculated?

If the credit reporting agency uses the FICO scoring method to determine your score, then it will take into account five different factors: your payment history, amounts owed, length of credit history, new credit, and types of credit.

Your payment history and amounts owed make up the biggest chunk of your credit score, so it’s a good idea to pay your bills on time and keep your debts low to maintain a good score. The credit reporting agencies also like to see that you have a mix of different types of credit and a history of using credit.

What information shows up on my credit report?

Your credit report includes information regarding your credit accounts and public records such as as your payment history, outstanding debt, current balances, bankruptcies, and foreclosures. Your contact information, such as your home address, Social Security number, and birth date, along with any hard and soft credit inquiries will appear on your report as well.

What’s the difference between a hard and soft inquiry?

Anytime that you or a third party checks out your credit report, the request will show up as an inquiry on your report. A hard inquiry refers to when a potential lender looks at your report to decide if you’re an ideal candidate for loans or credit cards. These hard inquiries may temporarily shave a few points off of your total credit score.

Soft inquiries on the other hand occur anytime you, an employer, or a company that you already have an account with, checks your credit report. Unlike a hard inquiry, a soft inquiry will not negatively affect your credit score.

How long will negative information remain on my credit report?

Missed and late payments, Chapter 13 bankruptcies, public records, student loan defaults, and foreclosures usually will remain on your credit report for seven years. Meanwhile, Chapter 7 bankruptcies could stick around for up to 10 years. As for hard inquiries, these marks may stay for two years.

What do I do if there’s an error on my credit report?

Write to the credit bureau that reported the mistake explaining why you believe the reported information is incorrect. Include copies of documents that support your claim and request that the credit reporting agency correct the error. Legally, the credit reporting agency must investigate the discrepancy in a timely manner.

What are some ways in which I can improve my credit report?

Your payment history accounts for around 35% of your total credit score, so paying your credit card, retail card, mortgage, and installment loan bills on time will help to increase your score.

Keeping a low credit utilization ratio may help too. This means using less than 30% of your total available credit and not maxing out your credit cards.

Also, keep in mind that every time you apply for a loan or credit card, a lender will perform a hard inquiry on your credit report, which can reduce your score, so avoiding frequent hard inquiries could boost up your score as well.

Guest Post Author Bio: Chloe Mulliner is a writer and editor for CreditSources.org, a website dedicated to cash advance loan information, credit related services, and all things credit.