“So, how do I improve my credit score?” It’s not something you learn how to do in school and, to be honest, it’s sort of assumed that everyone just “knows” how the whole credit scoring thing works. Here’s a quick, short explanation:

People who utilize credit, from credit cards to auto loans, have three standard credit scores tallied separately by the three major credit reporting agencies.  The scores are known as FICO scores (Fair Isaac Corporation). The scoring ranges from 300 to 850.  The most current national median score is roughly about 675.

Let’s say you need an auto loan but have a low credits score.

Here are a few key principles you can follow to raise your credit score.

1. The most important way to improve credit scores is also the least complicated.  Pay your bills in full and on time. Your overall history of making payment on your current bills accounts for about 35% of the FICO score.  Missing credit card payments or submitting the minimum due each month will immediately lower scores, as will any debt collections or bankruptcy filings that show up on your credit report.

2. Build up an active and lengthy credit history.  Don’t close out all of those old credit cards! Keeping them open builds your credit history.  This makes up about 15% of the FICO score.  Keep a few dormant accounts active.

3. Don’t open new accounts within 60 days of making a major purchase.  This results in about 10% of your score.  Taking out new credit lines raises red flags because it makes you look riskier. Just be smart and think twice about your future purchases and what looks likely to take place over the next few months.

4. Maxing or topping out your credit cards will drop your score like a rock.   Even using 50% or more of your limit can cause problems because it increases the risk that you may not be able to repay.  If you have five credit cards with a $5,000 credit line each, for example, it’s not wise to carry a balance of more than $2,000 per card.  It’s better to carry smaller balances on several cards than to pile everything onto one card.

5. Get a copy of your credit report and make sure your credit report is accurate.  This is very important.  Since credit scores are based on credit reports, it’s very important to make sure the information in your reports are fee of errors and fraud.  Federal law gives you the right to get a free report from each of the major credit bureaus once per year.

6. Have a wide variety of credit experiences and loans, over time.  This is called diversification and you’ll get credit for having a variety of loans. It’s better to have an assortment, including installment plans like auto loans or mortgages rather than simply credit cards.

Sounds simple enough. Can any one add to this or recommend some more about this? If you think you need help with your credit because you need a new car, see the Southtowne General Motors Superstore.