Nobody knows the exact methods by which your credit score is calculated, but you should definitely understand the importance of having a good score, and some methods which will help you improve your credit score.
Here are 7 Ways To Improve Your Credit Score
Pay on time. Every time .
The biggest knock on a credit score is late or missed payments. While you can't erase the sins of the past, you can make sure that moving forward you prove your credit worthiness by paying every bill on time.
Reduce the number of open debts.
It's been thought that, all things equal, the number of debts you have can adversely affect your limit. For example, if you have $4,000 in credit card debt, you might have a lower score if you have this spread across eight cards versus consolidating the debt down to one or two cards.
Keep open available credit.
One thing that likely factors into your credit score is how much of your available credit you have in use. Again, using the $4,000 credit card balance, you might find yourself with a lower score if your overall limit is $5,000 versus if it's $10,000. Not to say that you should open up new cards to increase your limit, but instead of closing cards and lowering your overall limit, you can just stop using them.
Understand different types of credit.
A $4,000 auto loan may have a different impact on your credit score than $4,000 in credit card debt. A mix of different types of debts is likely more favorable than just having one type of debt. Again, not advising that you run out and open more types of credit, but understanding the potential impact, especially before potentially taking on a new loan, is very important.
Keep aged credit.
Two people with identical credit situations can find themselves with vastly different credit scores simply depending on the age of their credit. If your oldest credit card was taken out just a year ago, you will likely have a lower score someone else whose oldest card was issued ten years ago, all other things equal. Before you start closing cards, again, take this into consideration.
Know that stability counts.
Many people open and close credit cards to take advantage of different reward programs. A few years ago, it was common to have reward cards available that would give you 5% or more back on your purchases, but the catch was that this was just a teaser, and the rewards would decline after a few months. People would simply move on once the premium rewards disappeared in order to continue to maximize their overall rewards. This can add up to big bucks in rewards but this will have a negative impact on your score. If you already have a top score, this will likely be negligible. For someone with an average score, this could actually do more harm than good. Weigh not just the reward benefits, but also the long term potential costs.
Keep working hard.
If you have a 600 credit score, it's not going to jump up to 800 overnight. But, it can be done as long as you work hard and understand that time is on your side. While there are many offers out there that claim to improve your credit score overnight, the best and most stable method is to make solid choices as noted above and do so over time. That will outlast any gimmick!
Readers, what have you done that's improved your credit score? Have you found any methods to work against you? I'd love to hear your thoughts in the comments below.