Your credit report affects a lot of important things. These things include buying a car, getting a new credit card, renting an apartment and/or buying a house.

First and foremost, verify that your credit report is accurate. After you are sure of it’s accuracy you can begin planning other steps to improve your credit score.

The way FICO evaluates your score is generally weighted by the following percentages:

On Time Payment: 35%

Payment history is a huge factor. Do you pay all of your bills on time? Your score will be affected negatively if you have paid bills late, had an account referred to collections, had a repossession, or declared bankruptcy.

Amount Owed Versus Capacity: 30%

Many scoring models evaluate the amount of debt you have compared to your credit limits. What is your outstanding debt? If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score. Maintaining a low balance on multiple cards is better than high balances on one, but don't run out for more cards to "even out" balances just before applying for a loan. Recent applications cost you as shown below.

Length Of Credit History: 15%

Generally, scoring models consider the length of your credit track record. How long is your credit history? An insufficient credit history may have a negative effect on your score, but that can be offset by other factors, such as timely payments and low balances. If you are going to close an account try to maintain the oldest accounts because age of account matters.

New Credit Accounts: 10%

Most scoring models consider recent transactions. Have you applied for new credit recently? If you have applied for too many new accounts recently or had too many recent inquiries, that may negatively affect your score. Not all inquiries are counted however. Inquiries by creditors who are monitoring your account or looking at credit reports to make "pre-screened" credit offers are not counted.

Types Of Credit In Use: 10%

Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. How many and what types of credit accounts do you have? In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies (rather than a bank) may negatively affect your credit score.

It's likely to take some time to improve your score significantly. However, the most important issues to improve your credit score are: the accuracy of your credit report, making on time payments, paying down outstanding balances and not taking on new debt.

The Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. It is enforced by the Federal Trade Commission. Recent amendments to the Act expand your rights and place additional requirements on Credit Reporting Agencies as well as businesses that supply information about you to these agencies.

If you tell an information provider in writing that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to the reporting agency. All of this can affect your credit score in your favor.

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