How To Improve Credit Score

Need to know how to improve your credit score? An improved credit score saves thousands of dollars over a lifetime in reduced interest charges. Higher credit scores translate into lower rates of interest on car loans, mortgages, and student loans--a worthwhile goal for anyone.

1. Get a copy of your credit report and scour for errors. Federal law requires each of the three national credit bureaus (Equifax, Experian, and TransUnion) to provide a free copy of your credit report once every twelve months. To improve your credit score, scour these reports for errors and call the credit bureaus if you find any. 
2. Pay bills–all bills–on time. The biggest component of a credit score is payment history. Paying late significantly lowers a credit score and takes years to recover. Credit bureaus keep track of how many 30 day, 60 day, and 90+ day late payments each consumer has accumulated and docks the credit score accordingly. If you have a history of making late payments, make a determined effort to get the bills in the mail on time.
3. Pay at least the minimum due on all accounts. Budget aside enough money to pay at least the minimum due on all credit card and installment accounts. This avoids any late payment reports to the credit bureaus and will, over time, improve your credit score.
4. If you do not have a credit history, establish credit. Credit history is another major component of a credit score, and a consumer with no history will not achieve a high score. If you have no credit cards or installment accounts, apply for a card at your local bank. Alternatively, establish financing when buying a new car or new furniture. Just verify whether the business reports accounts to the credit bureaus.  The longer your credit history, the better your credit score.
5. Reduce the total debt to total credit limit ratio. Ideally, this ratio remains below 30%. As more and more credit is incurred, the unused credit available shrinks. This reduces a credit score, and can have a significant impact. To improve credit score, pay off balances owed or obtain additional (untapped) lines of credit to reduce the total debt to total debt allowed ratio.
6. Limit inquiries into your credit. Each time you apply for credit (i.e. bank credit cards, store credit cards, car loans, mortgages, etc.) the business runs a credit check. Each inquiry reduces your credit score. This effect has the least impact of all the steps listed here, but should not be ignored.

Improve credit score and improve your financial health. Through reduced future interest payments, an improved credit score positively impacts your finances.

Reference:

The Federal Reserve System