How can you improve your credit score?

Keeping track of your credit score on a regular basis is crucial.  When you decide to buy a new home or refinance your current mortgage, there is often a short window of time between the initiation of the loan process and the closing date, and it's almost impossible to change your credit score that quickly.  There are strategies you can utilize regularly to make sure that your score is as high as possible when you do apply for a loan.

Check with each of the three credit reporting bureaus to make sure that the information they have on you is consistent and up to date.  Order a copy of your credit report once a year, and dispute any inaccuracies.

Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law have made "consumer-originating" credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to monitor their activity, and smart consumers shop around for the best mortgage and car loans. It's important to note that unsolicited credit card offers in the mail don't count against your credit report.

The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as many as 10 years, can significantly lower your score. It's never a good idea to take on more credit than you can handle.

Late payments work against you. It's extremely important to pay bills on time, even if it's only the minimum monthly payment.

Don't "max out" your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better.

By carefully monitoring your credit, it's possible to add as much as 50 points per year to your score.