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, 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 percent 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.)

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.

3. Don't despair if you have missed payments.
It's never too late to clean up your act. Get yourself current as quickly as you can and then stay current. Your score will begin to improve within six months— and the longer you keep it up, the more noticeable the increase will be. The negative weight FICO gives to bad behavior like delinquencies lessens over time, so as long as you stay on the straight and narrow, those black marks will eventually disappear from your record for good.

4. Keep your balance well below your credit limit.
Of all the factors you can control—and improve quickly—how much you owe is probably the most powerful. What makes this especially important is that ever since the credit crunch first hit in the fall of 2008, credit card companies have been cutting customers' credit limits without warning—a practice that can be devastating to your credit score. Say you've got a $1,000 balance on card with a $2,000 credit limit—and then the card company slashes your limit to $1,000. Suddenly, you've gone from 50% credit utilization to being maxed out, and being maxed out can cost you as much as 100 points. This is why I recommend you use the DOLP plan I explained in Step 3 to pay down all your credit card balances as quickly as possible.

5. Spread your balances around—and don't borrow from Peter to pay Paul.
Using one credit line to pay off another sets off FICO alarm bells—even if all you're doing is consolidating your accounts. All other things being equal, your FICO score will be higher if you have a bunch of small balances on a number of different cards rather than a big balance on just one or two.

6. If you rack up high balances, pay your credit card bill early.
The "Amounts Owed" part of your FICO score is based on the balance due listed on your most recent credit card statements. So even if you pay your bills in full each month, running up high balances can still hurt your score. You can avoid this problem by paying down all or part of your bill before the end of your statement period, thus reducing the balance due that will be reported to FICO.

7. Hang on to your old accounts, even if you're not using them.
Closing old accounts shortens your credit history and reduces your total credit—neither of which is good for your FICO score. If you have to close an account, close a relatively new one and keep the older ones open. Also, closing an account will not remove a bad payment record from your report. Closed accounts are listed right along with active ones.

8. Use your old cards. 
In the aftermath of the credit crunch, the credit card industry has begun closing inactive accounts. This can hurt your credit score, since it reduces the average age of your credit accounts. So my suggestion is that you pull out your old cards today and start putting at least one charge on each of them every month. This will keep the account open, which in turn will keep your credit history nice and long—and ultimately raise your score.

9. Demonstrate that you can be responsible.
The best way to raise your score is to demonstrate that you can handle credit responsibly—which means not borrowing too much and paying back what you do borrow on time. Don't open new accounts just to increase your available credit or create a better variety of credit. This is especially true if you are just beginning to establish a credit history. Adding a lot of new accounts may look risky—and it will definitely lower the average age of your accounts, which can hurt your score if you don't have much of a track record. You should open new credit accounts only if and when you need them.

10. When you're shopping for a loan, do it quickly.
When you apply for a loan, the lender will "run your credit"—that is, send an inquiry to one of the credit rating agencies to find out how credit worthy you are. Too many such inquiries can hurt your FICO score, since that could indicate you're trying to borrow money from many different sources. Of course, you can generate a lot of inquiries doing something perfectly reasonable—like shopping for the best mortgage or auto loan by applying to a number of different lenders. The FICO scoring system is designed to allow for this by considering the length of time over which a series of inquiries are made. Try to do all your loan shopping within 30 days, so the inquiries get batched together and it's obvious to FICO that you are loan shopping.

Adapted from Start Over, Finish Rich. Copyright 2009 by David Bach. Reprinted by permission of Random House, Inc.


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