How to Improve Your Credit Score

A good credit score can save you a lot of money through lower interest rates, so it's worth your time and effort to improve yours as much as you can. The process can take months (or sometimes years), but being patient and staying dedicated will definitely yield results.

Here are some obvious and some not-so-obvious ways to boost your score:

• Timely Payments. The best way to raise your credit score is simply by paying your debts on time. Even better if you can pay them off in full each month. Don't worry if you've had one or two delinquent payments in the past; those will have less impact on your credit score as time goes on.
   
• Less Debt. How much of your available credit are you using? The less the better. If you are almost maxed out on your credit cards, your credit score will take a hit. So try to stay well below your credit card limits by keeping your balances low. 
   
• Long and Strong History. By establishing a lengthy and stable financial history, you’ve proven yourself as a reliable and low-risk borrower. Those with no credit history generally have lower scores and a harder time finding loans on good terms. But those with a proven track record of paying back debts on time and being a responsible borrower will have higher credit scores, and access to new loans with lower interest rates. For this reason, it's a good idea to leave your oldest credit card accounts open.
   
• Few Credit Inquiries. When a lender or credit card company reviews your credit report, that is known as a credit inquiry. Too many of these inquiries can negatively impact your score, mainly because it is statistically proven that those applying for a lot of new credit are more likely to default on their debts. Several credit inquiries a year are perfectly normal, but a dozen in a short period of time can negatively impact your score. When shopping for a new car or mortgage, be careful about how many lenders you allow to pull your credit report.
   
• Type of Credit. A healthy mix of installment loans, open lines of credit, and revolving credit cards will boost your score (as long as you aren’t maxed out on any of them). But unfortunately there is no universal magic number of account types to have. The right balance for one person might not be the same for another. Instead of worrying about having the perfect number of loan types, focus instead on making timely and in-full payments each month and keeping your balances well below your credit card limits.
   
• Avoid Finance Companies. Finance companies prey on high-risk consumers. They typically charge exorbitant interest rates, and place very strict terms and penalties on accounts. Opening a loan or a credit card with a finance company will hurt your score, so make sure to steer clear of these types of lenders. And always read the fine print before signing any application for a loan or credit card.
   
• Time.  If you’ve declared bankruptcy or had debts turned over to collection agencies, you almost certainly have a low credit score. In these cases, only time—about 6 or 7 years—can erase that negative credit history. But take heart: You will be able to rebuild your credit once you have a clean slate. It just requires some patience, financial responsibility, and a little bit of knowledge about how the credit scoring system works.