How To Improve Your Credit Score

Your credit score is one of the most important numbers in your life. Banks use your credit score to determine whether or not you are credit worthy and how much interest to charge. Many employers and landlords use your score as a gauge of your fiscal responsibility. Your score also can determine how much you pay for your insurance premiums. With so much at stake with your credit score, it is important to maintain a good one. The three main credit bureaus, Equifax, TransUnion and Experian, determine your credit score (also known as the FICO score) based upon the following make-up:

* 35 percent: Record of paying bills on time
* 30 percent: Debt-to-Income Ratio
* 15 percent: Credit History
* 10 percent: Credit Mix
* 10 percent: Recent Credit Inquiries

Your credit score can range from 300 to 850. If your score is above 760, you are in the upper echelon and will most likely get the best rates. A score below 620 places you in the sub-prime category with higher interest rates or even denial of credit. The credit bureaus are required to provide one free credit report a year, but you will have to pay for your FICO score. Go to annualcreditreport.com to get your free report. Raising your score may take some time, but it can be done and you should make it a high priority!

Here are some steps to follow:

* Pay your bills on time! This includes parking tickets, library fees, utilities and any other bill that you receive. One late payment can lower your score by 100 points. If you have any late payments, get current and stay current. The longer you pay your bills on time, the better your score.

* Limit the available credit you have to 30 percent of your limit even if you pay off the balance every month. Creditors do not like to see you maxing out your credit cards. If you have a lot of debt on your cards, stop spending and start paying them down. Don’t close multiple credit card accounts either; it lowers your credit availability and can hurt your score.

* Creditors like to see a long credit history. The longer you have been paying your credit accounts, the better it is since it shows lenders you’re more likely to pay in the future. Keep your oldest accounts open and manage them responsibly.

* The score also includes information on what type of credit you have. Creditors want to see a mix of revolving credit (credit cards) and fixed credit (mortgages, car loans).

* Do not apply for too many credit cards or loans. A credit inquiry can lower your score by five points. Multiple inquiries for a mortgage will only count as one.

Also be wary of the credit repair services. They may charge you a high fee and not end up helping your score.

You must manage your credit responsibly. Be patient, and following the above steps will raise your credit score!