To really start working on your credit score, you should first try to understand how your credit score works.  The most popular credit score out there is the FICO score and you really should understand the FICO score calculation.  If you know this then you will begin to see how you stack up and should be able to come up with your own solutions, depending on your situation, to raise your credit score.

The first thing you should know about raising your credit score is that you must pay your accounts on time.  You should never be late.  This is the largest part of your score and even one late payment will hurt your ability to get an excellent credit score.

Paying on time is first but second is the level of debt you carry.  This is commonly called your debt to credit ratio and having a good debt to credit ratio is key to having a good score.  If you commit to paying off your debt you will see an improvement over time.  It will be gradual and will take time.  This also requires true commitment.

The next part to consider when trying to figure out how to raise your credit score is to look at your credit history.  What you need to know that the average age of all your accounts is called into question as well as the age of your oldest account.  There isn’t much you can do to manage this piece but maybe not apply for credit and get new accounts if you don’t need credit.

Another thing to consider if you are trying to figure out how to raise your credit score is your applications for credit, meaning are you applying for new lines of credit?  You should stick to the rule if you don’t need the credit don’t apply for it.  I know all those you get in the mail are great or a 10% discount off the current purchase at the local retailer is tempting, but skip it.  The applying for excessive lines of credit can hurt your chance to improve your score.

There are lots of other ways to start improving your score and these are only a few.  But the ones above are a good starting point.

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Do: Pay your Creditors on Time

This seems obvious but is a struggle for many individuals. This is actually the single worse thing you can do to your credit score becuase your payment history carries such a large weight.

Don’t: Close Old Accounts You Don’t Use

First, closing old accounts could hurt your credit history. More specifically the average of all your accounts. This is a another major factor in your credit score and closing old account will skew the average. Also, you will lower the total available credit you have and thus raise your debt to credit ratio. Another factor that will weight against you in the credit score formula.

Do: Use a Budget Each Month

You need to know where your money is going at all times. A budget is essential to ensure you pay everything on time and pay down any debt you have. This will prevent you from saying at the end of the month where did my money go?

Do: Check Your Credit

You are allowed access to your credit reports free one time a year so take advantage of it. Creditors sometimes make mistakes and you need to check to see if your report is accurage. Cleaning your report of potential errors is a great way to get an instant boost to your credit score.

Don’t: Think You Can Close An Account To Make It Go Away

Many times individual will have an account that has many delinquencies and other issues, but thinking if you close it to make not appear on your credit report is wrong. It will stay on your credit report so there are many times no reason to close it and again you might be hurting your debt to credit ratio.

Do: Shop for Auto Loans and Mortgages

Sometimes you might hear the credit myth that shopping for credit will kill your score because of the credit inquires. Well, this isn’t exactly true. Consumers are allowed to shop for loans that represent a large purchase such as a mortgage or auto loan. They are not suppose to shop for unsecured loans like credit cards. These you know the terms up front and there is no need to shop.

Well, again these are just a few and there are many more, but hopefully there will be more of these down the road for me to write about.

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Credit Score Improvement Tip One: Focus on Your Payment History

There is nothing more important in the FICO score calculation than your payment history and it carries a weight of 35%.  Here is a list of credit score improvement tips just for your payment history

• Pay your bills on time – Since late payments make up the negative entries in this section avoiding them will be helpful.
• If you are not current get current with your bills.
• If you are struggling to pay your bills talk with your creditor and try to arrange an agreement

Credit Score Improvement Tip Two: Pay down your debt

Your debt to credit ratio makes up the next largest portion of your credit score and a high one will not be in your favor.  Here some idea specific to this area:

• Develop a budget and live by it.  If you don’t know where your money is going or have trouble controlling your spending this could be the first place to start.
• Find some extra money to pay off debt.  You could have a garage sale or get a second job.
• Don’t open accounts to get a good debt to credit ratio.  If often doesn’t work and if you are already struggling to control what you have it is best to limit what you can have available

Credit Score Improvement Tip Three: Don’t Apply for new credit unless you need it

How often you apply for new credit is known as a credit inquiry and these can either hurt your score or do nothing at all.

• The best rule is to not apply for credit if you don’t need it.
• Avoid applying for many new credit cards in a short period of time
• Find a mortgage or auto loan within 30 days of your first application.  These will only count as one single credit inquiry

Conclusion

Since many of the factors of your FICO score are interdependent doing just one will have little or no effect.  You must try as many things as you can to really improve your credit score.  Also, you must realize it is going to take time.

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