Credit score
Photo: Stockbyte/Thinkstock
So let's get started. The simple truth is that raising your score isn't that hard if you know what to do. It just takes time. As I noted above, it's mainly a matter of understanding the factors that FICO weighs and then figuring out which of them you can change for the better. Over the years, I've coached literally thousands of people on fixing their credit scores, and based on that experience I've developed a 10-step action plan to get your score up quickly and keep it there. I promise you—regardless of where you are starting from, if you follow this plan, in six months your score will be higher than you thought possible.

1. Get your credit report and check it for errors.
There is only one place you can get a truly free copy of your credit report: www.annualcreditreport.com, a centralized service for consumers to request free annual credit reports run by the three nationwide consumer credit-reporting companies, Equifax, Experian, and TransUnion. You must do this first, because it's extremely likely that there are errors in your report. A 2004 survey by the National Association of State Public Interest Research Groups found that 79% of all credit reports contained incorrect information. There is no reason to believe that things have gotten any better since then. Once you get your report, go through it with a fine-tooth comb. If you find any damaging errors (for example, late payments that were actually paid on time or credit limits that are lower than they should be), get them corrected as quickly as possible. You can do this by sending the credit agency a certified letter that explains what information was inaccurate, including copies of documents (such as bank records or mortgage statements) that verify what you're saying, along with a copy of your credit report with the disputed information circled in red. Under the Fair Credit Reporting Act, both the credit-reporting agencies and the banks and merchants that provide them with data are required to correct inaccurate or incomplete information in your report when it's pointed out to them. (Occasionally, errors can help you, as when accounts you closed are listed as being open; don't feel obliged to correct these.) You can find sample correction letters on my website at www.finishrich.com/creditletters.

2. Automate your bill paying so you never miss a deadline.
Even if it's only a few days late, just one overdue payment—whether it's for your mortgage, a utility bill, an auto loan, a Visa account, or any of a hundred other credit obligations—can seriously damage your FICO score. FICO pays a lot of attention to whether you make a habit of missing due dates, so a series of late payments can really hurt your score. By the same token, a consistent record of on-time payments can improve it. Although FICO says it takes as much as two years of on-time payments to bump up your score, my experience is that if you pay all your bills on time for a year, your score will improve. This is why it is so important to set up the kind of automatic bill-payment plan I described in Step 3. If you haven't already done this, go back and reread that step and put the plan in place—it will protect your credit score and ultimately raise it.