10 Ways You Can Improve Your Credit

Whether you are trying to buy a house, obtain a personal loan, or simply purchase a computer on a lay-away plan, your personal credit will affect your ability to accomplish these goals. Loan officers and lenders analyze your credit report before deciding what interest rate should be applied to your loan, or if a loan should be extended to you at all. If you want to ensure that you obtain loans at the lowest interest rates, you will need to improve your credit. These 10 steps can help you improve your credit:

1. Pay off your debt. This may seem like a no-brainer, but it's amazing how many people do everything but try to pay off their debts when attempting to improve their credit scores. However, your credit score is largely influenced by your credit-availability-to-credit-used ratio. FICO will reduce your credit score if it finds your ratio to be above 50%. Try getting your ratio below 50%, and then go under 25% for an even better credit score.

2. Obtain a secured credit card. When you're trying to establish your credit for the first time, or when you're trying to reestablish your credit after a bankruptcy, obtaining a credit card may be impossible. However, most banks and credit unions offer secured credit cards quite readily. To obtain a secured credit card, you simply need to deposit some money at the issuing institution in order to cover your credit card charges should you default. If you make sure that you do not default on such a credit card, your on-time payments will go a long way towards establishing or reestablishing your credit.

3. Obtain store credit cards. Most major department stores offer credit cards that can be easily obtained and used for purchases in the store. While these credit cards usually have low spending limits, they can work in your favor if you keep your balances very low and pay them off every month.

4. Obtain a passbook loan. A passbook loan is a personal loan that uses your savings account for collateral. Most banks and credit unions offer passbook loans at low interest rates. If you obtain such a loan, credit bureaus will treat it as an installment loan. As long as you make regular payments on this installment loan, your credit rating will improve.

5. Keep old accounts open. You may no longer use your old VISA or American Express card, but that is no reason to close them. Old credit card accounts affect your credit score considerably because they help establish your credit handling seniority. Instead of closing an old account, hide the credit card in a secure location and, if need be, open a new and different credit card account.

6. Check your credit report. You can obtain your credit report for free once a year from the three major credit bureaus of Equifax, Experian, and TransUnion. Once you obtain your report, check it carefully to ensure that there are no reporting mistakes. If mistakes are found, report them to the respective credit bureau immediately.

7. Defend yourself. Under the Fair Credit Reporting Act, you can actually include a 100-word statement in your credit report about why you were delinquent on a credit card payment or loan. Most credit bureaus offer help with writing such statements on their web sites. These statements can be quite valuable if a prospective employer or landlord is looking over your credit report and trying to make a decision about your fiscal responsibility.

8. Protect yourself from identity theft. With credit card numbers and other personal data being input over insecure Internet connections, and with mailed copies of bills and statements frequently falling into the wrong hands, it is easy to see how identity theft can happen. Defend yourself from identity theft by guarding your account numbers, shredding or even burning all your financial and credit card statements, and keeping a locked mailbox. Do not carry your social security card in your wallet or purse, either of which could be easily stolen, and don't give out account numbers over the phone if you are unsure of whom you're talking with.

9. Get organized. Keep your checking account up-to-date, tracking all deposits and withdrawals that are made to it. Likewise, set up a system for tracking and paying your bills. If needed, sign up with a site like Mint.com in order to better understand where your money is going each month. Devising a monthly budget, and sticking to it, will also help you improve your credit.

10. Get professional help. If you are already doing all the above mentioned items and are still having trouble with improving your credit rating, then seek out the help of an attorney or credit counselor. Either of these individuals can get in touch with your creditors and negotiate a better repayment plan or even debt forgiveness. If you do decide to enlist the services of a credit counselor, be sure he or she is certified by the Council on Accreditation.