"The longer and deeper you are in debt the higher the score."
Uhm... No.
That's overly simplistic, and in a lot of ways, incorrect. It is far more complex than that. You can have relatively little debt and have an excellent score, or you can have a lot of debt and have an excellent credit score.
In my case, I have relatively little debt (especially compared to the amount of credit available to me) and my credit score is well over 800.
This chart shows the major components that factor into a credit score:
http://www.myfico.com/crediteducation/whatsinyourscore.aspxThat chart shows 5 major components that are figured in a credit score:
1. Payment history
2. Amounts owed
3. Length of credit history
4. Credit mix
5. New credit
Payment history has the biggest overall effect on your credit score. If you miss payments, are late, have charge offs or a bankruptcy, that's going to have a huge negative impact on your score.
The amount you own isn't just a total number, it also looks at overall credit utilization, that is the ratio of available credit to outstanding debt. If you have available credit of $5,000, but owe $4,900, your credit score is likely going to be a lot lower than if you only owed $490.
Length of credit history is primarily the length of time you've held accounts as well as the length of time you've actually been using credit. Higher credit scores coming from having a number of accounts you've had for multiple years. People who used to do the "open a credit card for 0% interest for 18 months, transfer my old balance, and close the old card" invariably were hurting their credit rating by doing that. Before I realized how important this was, I closed my Sears card which I had had since the middle 1980s. Fortunately I didn't close my credit union card, which I've had since 1988. I've also stopped hopping credit cards, and in the last 5 years have opened only one new credit account, last January to take advantage of Bridgestone's "use our money for free to fix your car!" My credit score dropped 2 points.
Credit mix is a lot more nebulous as to how it affects your credit rating, but the old saw of "mortgage is good debt, credit cards are bad debt" still has a lot of meaning for this factor, apparently.
New credit ties in with the length of credit history. A bunch of newly opened accounts with no payment history are going to pull your score down for awhile. It will recover as you use, and make payments on, those accounts.
Oh hell, I jut typed all of that out, and much of it is in this link:
http://www.myfico.com/CreditEducation/ImproveYourScore.aspx