Why paying bills on time matters?

Most banks, department stores and credit card companies check your credit score and history with one of the three consumer reporting agency before issuing a card.  You need to understand how your credit score is determined.  Here are few basics.

Your outstanding debt matters in calculating your credit score.  Consumer reporting agencies that keep a record of your debt use amount of debt you owe and the credit limits to come up with a credit score.  If the amount you owe is closer to your debt limit, it affects negatively on the score.

How you pay your bills matters when it comes to calculating a credit score.  If you have late payments, you have been referred to a collection agency or you have filed bankruptcy, your credit history will not only reflect that but also negatively impact your credit score.

How long you have credit also plays a role in calculating your credit score.  Short history could result in a lower score but other factors such as timely payments may offset any negative impacts.  Additionally, if you have applied for new credit, it impacts your credit score.  All consumer reporting agencies also consider type of credit accounts you have to determine your credit score.