A credit score predicts one thing: the likelihood you will repay borrowed money on time. It is not an assessment of financial health and several sensible behaviours lower it.
What goes into it
Payment history, which is the largest component. Missed payments have a substantial and lasting effect.
Amount owed relative to available credit. Using a high proportion of your limits suggests strain, even if you pay in full.
Length of history. Older accounts help, which is why closing your oldest card can lower your score.
Recent applications, since several in a short period suggests difficulty.
And the mix of credit types, which matters least.
What is not included
Income, savings, or assets. Someone with substantial wealth and no borrowing history may have a thin file and a poor score, because there is nothing to predict from.
Common misconceptions
That checking your own score lowers it. It does not – that is a different type of check.
That carrying a balance helps. It does not; paying in full is fine and saves interest.
That there is one score. There are several models and each lender may use a different one.
What actually improves it
Paying on time, every time, which is what automatic payment for the minimum exists for.
Keeping utilisation low, well under a third of your limit.
Time. Most negative marks fade after a period defined by law in each country.
The caveat
Systems differ substantially between countries. This describes the general logic rather than any specific national scheme.