When the time comes for you to apply for a loan for a car, house, or anything else, the lender will base his decision on whether you qualify for a loan on your credit score.  Your credit score is a number based on your previous credit history.  If you have been denied for a loan, or simply want to be sure that you get the best interest rate possible, there are a few things you can do to improve your credit score.

Check Your Credit Reports

The first thing you should do before applying for credit is to request copies of your credit reports.  There are three credit bureaus (Experian, Equifax, and TransUnion), and your report may be slightly different with all three, so contact all three companies.  Depending on the state you live in, you may have to pay a small fee to access these reports or you may be able to obtain them for free.

Look over your reports carefully and be sure that all of the information on them is correct and accurate.  There are sometimes errors, and it’s best to clear these up before requesting credit from a lender.  An error can knock points off of your score, so fixing any errors may raise your score immediately.

Pay Down Your Debt

If you have credit card debt, now is a good time to stop charging and start paying down the debt.  If you have balances on your cards that are at or near the maximum allowed, this will lower your credit score.  Paying some or all of the balances off will raise your score.  If you can’t make a large dent in your debt owed, try to at least pay more than the minimum owed on the cards with smaller balances.  This will slowly reduce your debt, and then you can apply more funds towards the cards with larger balances.

Don’t Pay Late

Make sure that you are paying all bills, even utility bills, on time.  Utility companies will often report to the credit bureaus if you are more than 30 days late in paying your bill.  If you have medical or dental bills, contact the doctors’ offices to work out payment arrangements, and stick to them, as many medical offices will report late payments.

Close Inactive Accounts

If you have credit card accounts that are paid off and you don’t intend to use them anymore, call the companies and close the accounts; having a zero balance does not necessarily close your account.  Too many open accounts, even with no balances, can lower your credit score.

Open New Accounts

Conversely, having no credit history can also lower your credit score.  If you have no or very little credit history, you may want to consider opening accounts.  You can do this by applying for a department store credit card or a bank credit card with a low credit limit.  Charge an item and pay it off in full when your bill comes in.  Do this for several months in order to build up your credit and raise your score.  Make sure that every payment is on time, and if you can not pay the entire balance off each month, at least pay more than the minimum payment.

While it may take several months or even several years to repair bad credit, by changing your credit habits now, you can begin to raise your credit score and make it easier to obtain credit in the future.