What do YOU want to do?...
Not impressed with your credit score? Bad, blemished or even lackluster credit can make obtaining loans and credit cards difficult. Sometimes even impossible. But there’s good news. If you’re out to improve your score, all you have to do is follow these guidelines. Just take it one point at a time.
Establish a credit history
If you don't yet have any credit history, it's time to establish one so that when you do need to take out a loan, you can obtain what you need.
Find out your credit score
Before you can improve your score, you need to know what it is. You can purchase your score from several agencies such as myFICO.
Obtain your credit report from all three agencies
If it's been more than a year since you've checked your credit report, access your free copy via www.annualcreditreport.com so you know what’s on your history and can identify any errors.
Throughout the course of this year...
Be aware of things that DON'T affect your credit score
Employment history, interest rates on your debt, the amount you have in the bank, your age and where you live are all irrelevant to your score.
Correct any errors you found on your credit report
If there are accounts you don't recall opening or unpaid bills that have been paid, take the steps needed to clear them up.
Limit the amount of new accounts you open
Lots of new accounts can hurt your score, so only open accounts when you need them. Likewise, every time you apply for new debt it shows up in your history and can hurt your score.
Pay all your bills on time, every time
Even one late payment can have a derogatory effect on your credit score, and it remains on your credit history for up to seven years after the late payment. Don't delay, even if you have a dispute.
Pay down debt
You don't have to be debt-free to have a good credit score, but having credit cards that are close to their credit limit will hurt your score. Try to keep your balances to 30 percent or less of the available credit on your account
Try to get rid of "bad debt"
There is such a thing as "good debt" versus "bad debt." Good debt is when you’ve purchased something that will outlive the life of the debt such as a home, car or education. Bad debt is the opposite – credit card debt falls in this category, since it is assumed that by the time you pay off the balance, the stuff you purchased will be worthless. Think of it this way: good debt moves you forward, and bad debt holds you back.
Throughout the years...
Keep an eye on your history
Continue to obtain your free report copies on an annual basis. Keep in mind though that every time you have a report pulled, it shows on your report and this can have a derogatory effect on your score. Try to stick to just annual checks unless you're concerned about identity theft.
Protect yourself from identity theft
Even after you've proven that your identity was stolen, it can take years to recover your credit history. Prevention is the best solution.
Repeat the above
Keep paying your bills on time, paying down debt and keeping your report error-free. Once you pay off credit cards, you should keep at least one account open so that you can continue to demonstrate your credit history. You don't have to have debt to have good credit, but you do need to show a history of paying back what you owe.