Shape Up Your Credit Score

Simply put, a credit score is a number representing the likelihood that you will pay your debts. This number gives creditors and lenders a decision-making tool as to whether to extend a loan to you and at what interest rate and credit limit. Although a perfect score of 850 may not be within reach, a high score can mean getting a lower interest rate, therefore saving you money by paying less interest over time. Follow these steps to keep your score in tip-top shape.

Order Your Credit Report

Your credit score is based on your entire credit history, calculated using information contained in your credit report. By law, you're entitled to one, free credit report a year from each of the three main credit-reporting companies at annualcreditreport.com. Carefully review each of them for accuracy and dispute all errors. An up-to-date credit report can ensure an accurate credit score.

Purchase your credit score

Since your credit score isn't included on your free credit report, you'll have to pay for it. You can purchase it from any of the three credit-reporting companies listed below. Whether you are applying for an auto or mortgage loan, buy your credit score prior to applying for a major loan so you can negotiate a competitive interest rate.

• Equifax: equifax.com 1-877-726-7311
• Experian: experian.com 1-888-EXPERIAN (397-3742)
• TransUnion: transunion.com 1-800-888-4213

Improve your credit score

1. Pay your bills on time. Your payment history accounts significantly to your score, so don't miss a payment. If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your score should increase.
2. Keep balances low. High outstanding credit card debt can negatively impact your credit score. Ideally, you want to borrow less than 30% of your available balances, so avoid using all your available credit.
3. Pay off debt rather than move it around. Paying down your debt, instead of moving it from one credit card to another, is another effective way to improve your credit score.
4. Manage credit cards responsibly. In general, simply having credit will raise your credit score as it shows creditors that you can manage credit responsibly but, remember, keep credit card balances well under the credit limit.
5. Don't close unused credit cards. Old accounts—even those you haven't used for a long time—can help your score. It not only matters how you use credit today but also how long you've used credit.
6. Use your hard inquiries wisely. A soft inquiry into your credit—when you apply for a job, receive an auto pre-approval or rent an apartment—does not adversely affect your credit score. Hard inquiries do. Anytime you get a loan or credit card, the lender conducts a hard inquiry. So forgo getting a store credit card just to save 10 percent on a single purchase.
7. Know the going interest rates. Current rates for credit cards, mortgages and car loans are published at bankrate.com. If you have a good credit score but are not offered a good interest rate, ask questions and negotiate.
8.  Contact creditors. If you are having trouble making ends meet, contact your credit union, creditors or a legitimate credit counselor to assist with managing your credit.
9.  Re-establish your credit history if you've had problems. Opening new accounts responsibly and paying them on time will raise your score in the long term.
10. Don't buy into scams. Avoid the use of credit-repair services. Improving a credit score is achieved through making reliable repayments.

Having a good credit score doesn't happen overnight, so take the time to get it into great shape.