Step 1: Pay your bills on time

Your payment history makes up about 35% of your credit score more than any other factor. If you have a history of paying bills late, you should start paying your bills on time. If you haven’t made payments, get current and stay current. Each timely payment updates positive information on your credit report. The longer your history of paying bills on time, the higher that part of your credit score will be.

Step 2: Check your credit report

* Errors happen, so review your report carefully for:
* Accounts that are not yours
* Accounts with incorrect account date or credit limit
* Names and Social Security numbers that are not yours
* Addresses where you have never lived
* Negative information, such as late payments, with more than seven years. (Late payments can only legally stay on your credit report for seven years.)

Under the Fair Credit Reporting Act, the three national bureaus (Equifax, Experian, and TransUnion) and your creditors are responsible for correcting errors on your report. The Federal Trade Commission (FTC) website has detailed steps for correcting errors, as well as a sample dispute letter. If you find accounts that are not yours and you suspect you have been a victim of identity theft, you should place a fraud alert on your credit report, close those accounts, and file a police report and FTC complaint.

Step 3: Pay off your card balances

The amount of debt you owe is carefully analyzed to determine your score. Your total reported debt is taken into account, as well as the number of accounts with outstanding balances and the amount of available credit that has been used. Total reported debt is compared to total available credit to determine your debt-to-credit ratio. Your credit score can be affected if those numbers are too close. Your best plan to reduce your debt is to make a plan to pay it off. While it may seem like a smart move, don’t consolidate debt into a lower-interest card. Credit inquiries and opening new credit can lower your credit score, at least in the short term. Closing old cards with high credit limits can also upset your debt-to-credit ratio. If a new credit offer is too good to pass up, keep your total amount of available credit high by not closing any old credit cards.

Step 4: Use credit

You must use credit regularly so that creditors update your credit report with current and accurate information. While paying with cash or a debit card can make it easier to stick to a budget, a cash-only lifestyle does little to improve your credit score. The easiest way to use credit is with a credit card, especially if you’re trying to improve your score to qualify for an installment loan. If you have an old credit card, start using it responsibly again. A long credit history is a positive determining factor for your credit score, so it may be advantageous to reactivate an inactive account. Although you should make sure you use credit regularly, only charge as much as you can afford. Keep your credit balances low so you don’t hurt your debt-to-credit ratio.

Step 5: Monitor your report

Keeping a close eye on your credit report will allow you to see if your hard work is paying off. Credit monitoring allows you to monitor account activity. You will also be promptly informed of any fraudulent activity. Credit bureaus and FICOs offer credit monitoring services, which typically cost about $15 a month to monitor all three credit reports and scores. You can also use Credit Karma or other free sites alike.

Step 6: When looking for a loan, do it quickly.

This is a trick due to the time lag between the lenders and the 3 bureaus.

When you apply for a loan, the lender will “run your credit,” that is, send a query to one of the credit reporting agencies to find out how creditworthy you are. Too many questions like these can hurt your FICO score, as it could indicate that you’re trying to borrow money from too many different sources. Of course, you can generate a lot of inquiries by doing something perfectly reasonable, like shopping around for the best mortgage or car loan by applying to several different lenders. The FICO scoring system is designed to allow for this by considering the time period over which a series of inquiries are made. Try to do all of your loan shopping within 30 days, so the inquiries are grouped together and it’s obvious to FICO that you’re looking for loans.