How to Improve Your Credit Score

Having a healthy credit score has never been more important than it is now. As banks tighten their lending standards, it's very important to have your score as high as possible.
A FICO score is a number, in general from 300 to 850. This score is formulated from your payment history, including such things as amounts of money owed, length of your credit history, new credit accounts open, and how you have used your credit. Age, salary, race, education, and religion do not affect your score. You can't buy a good score; you can only build one over time by demonstrating that you are a responsible borrower.
To improve your credit score, start with these few simple steps.
1. Pay your bills on time
This seems like a simple enough feat right? Actually in these hard economic times, more and more borrowers are finding themselves hard-pressed with the decision of what bill to pay. If you find yourself having a hard time paying bills, be sure to talk with the lender or company you owe. They may have programs or suggestions that will help you avoid having your bill sent to collections.
2. Don't let items go to collections.
Once an item is sent to collections, your credit report will suffer. This ding on your score will stay on your report for seven years. OUCH!
3. Don't open other new credit lines when applying for a home loan.
You may want the new car or living room set, but the home buying process is not the time to open multiple new accounts. This is a sure fire way to temporarily reduce your credit score. If you do this before finalizing your mortgage, you may find yourself stuck with a higher interest rate.
4. Monitor your report on a regular basis for errors and cases of identity theft.
Believe it or not, errors do happen more than you realize. To get them corrected quickly, be sure to contact both the organization that provided the erroneous information, as well as the credit bureau. Identity theft happens. And it is your responsibility to identify it and address it!
5. Pay down credit cards.
Carrying high balances on credit cards can severely affect your credit score. Think of it this way. If you have a grand total of $30,000 worth of credit limits available, but you owe $15,000 on all of your cards put together, you are using half of your available credit!
The best loans and mortgages are available to borrowers with FICO scores 700 and above. Experian, one of the major credit reporting agencies, reports that the average credit score is 693.