How to improve your credit score

When it comes to credit reports, there are three main credit bureaus which keep track of your credit information.

They include:

If you want to see a true picture of your credit rating, you will need to see what all three bureaus are saying about your financial history.

As a consumer, you are allowed (by law) to receive one free credit bureau report from each of the three bureaus each year.  You can visit each site separately, or you can obtain one combined report from AnnualCreditReport.com (the official credit bureau site for obtaining your combined annual free credit report from all three agencies).  To visit AnnualCreditReport.com, click here:

When you visit one of the sites to retrieve your credit report, you will need to enter basic information about yourself, including your name, address, social security number, birth date, last address, and possibly employment.

Fill out the required information, and your credit report will be generated.

At this point, you can either save the file to your computer (if you're working at home on a private computer), or you can print the report.

****Remember, your credit report includes very personal information about your identity.  If you're working on a computer where a number of people have access (for instance, a computer at a public library), be sure you do not save information to that computer.  Remember to keep your printed report in a safe place, so no one has the ability to steal your personal information.

Reading a credit report can be a little tricky, especially if you've never seen one before.

Credit reports from the different credit bureaus look a little different, so there is not really one standard format.

However your credit report (from any one of the bureaus) will have the following basic information:

*Your current address and past addresses

*The last known employment

*Judgments and bankruptcies

*A list of all of your known creditors

*Your credit history with your creditors (and whether you have ever been 30, 60, or 90 days past due or had an account "charged off" from a bank)

*Inquiries into your credit

Take some time to go over each line of your credit report.  Do you see any errors?  Are there things there that should not be there?

Mistakes on credit reports are fairly rare, however if you should find a mistake, take the time to fix it.

Each credit bureau has a form that must be filled out for possible discrepencies in reporting.  Simply fill out the form with the mistake that you see, attach any proof of the mistake you may have, and submit it to the agencies.  The credit agencies will research the matter and decide whether to remove the item(s) from your credit report.

Removing mistakes from your credit report will improve your credit score.

While credit institutions like to see that you do indeed have credit, using all of your available credit can be a red flag to potential lenders.

If you have a credit card with a credit limit of $5000, and your current balance is $4900, this signals  a lender that you may be in pending financial trouble.  However, if your balance on that same card is only $1000, it shows the lender you are a reponsible spender. 

Lenders prefer to see you are spending less than 50 percent of your potential credit.

Review your current credit limits.  (You will see this on your credit report).  Determine what percentage of credit you are using.  If you find that your credit balances are high in comparison to your credit limits, take action.

First, stop using your credit cards, and do not increase your credit balances.  Second, do not put more charges on your credit cards if you receive credit limit increases.  Lastly, work on paying down your credit balances so it will not appear you are using the entire amount of credit available to you.

Decreasing the amount of credit you are using will improve your credit score.

A consumer who suddenly closes his credit accounts can signal financial distress to potential credit lenders.  If you have an account you are no longer using, do not cancel the account.  Allow the credit line to remain open and active ---- simply don't use it.  If you must cancel accounts, only cancel one every several months.  Refrain from cancelling several accounts at once.

Keeping your accounts open --- and not cancelling them ---- will improve your credit score.

The best action you can take to improve your credit rating is to pay your bills on time.

The largest portion of your credit rating is comprised of your past payment history.  If you've failed to pay other lenders in the past, why would a new lender want to take a chance on you?

Ideally, lenders want to see six months of on-time payments, although sometimes they will look for 12 months of consistent payment history.

Most creditors will not report past due payments to the credit bureau until you're over 30 days past due.  Do everything you can to make sure you are not past due on your bills, so the creditor will not report your late payments to the credit bureaus.

Paying your bills on time will improve your credit score.