In the world of personal finance, there are few things worse than a poor credit score. A subpar score can end up costing you tons of money in interest throughout your lifetime, assuming you're able to qualify for financing at all. Take these steps to improve a credit score.

1. Check your credit reports for accuracy
Your credit score is based solely on the information reported in your credit report. If the information in your report is inaccurate, your credit score will be, too. That makes it important for you to check all three of your credit reports for errors. If you find inaccuracies, be sure to dispute the items directly with the credit reporting agencies to have them corrected. Under the Fair Credit Reporting Act, you're entitled to one free credit report from each of the three credit reporting agencies once every 12 months. At you can request your report from Equifax, Experian, and TransUnion. Order and view each report online or request that a copy be mailed to you.

2. Find out where your credit score stands
After you've verified the information in your credit reports is accurate, find out where your credit score stands. A number between 300 and 850, your score is a gauge of how likely it is you'll repay your debts. The higher the number, the better your credit score.

Here's a breakdown of credit scores and what they mean.

Credit Score Range


720 to 850


680 to 719


620 to 679


580 to 619


500 to 579


300 to 499



Unlike credit reports, annual free reports do not include your credit score. But you can obtain it using a free credit score resource such as that offered through

3. Know the variables that contribute to your low credit score
Credit scoring models are designed to include reasons that explain where you lost points in your credit score calculation. Credit scores are determined considering the following factors:

  • Payment history (35%): Your score is negatively affected if you've been late in paying your bills, had an account sent to collection, or declared bankruptcy. The more recent the problem, the lower your score.
  • Outstanding debt (30%): If the amount you owe is close to your credit limit, that'll negatively effect on your score. And if you carry a balance on a number of accounts, that might lower your score because it looks like you're overextended.
  • Length of your credit history (15%): The longer your accounts have been open, the better. A short history is OK so long as you don't owe too much and have paid on time.
  • New credit (10%): If you've recently applied for many new accounts, that may negatively affect your score.
  • Types of credit in use (10%): Looks for a mix of different types of credit, both revolving accounts and installment loans. This factor is important only if there isn't a lot of other information to use in determining your score.

As you can see, some variables carry more weight than others. Armed with this knowledge, you'll be able to find out what's causing your credit score and outline a credit score improvement plan that's specific to you.

4. Outline your plan and stick with it
Now that you've identified the causes of your credit score, put a plan in place to improve your score and stick with it. If your credit score is low as a result of negative impacts on some of the more significant variables, it's going to take time and consistent changes in the way you manage your credit obligations. First, address any outstanding collections or unpaid debts. Second, add new positive credit information to your credit reports to help offset the damage. Then, manage your accounts impeccably this time around. That means making all of your payments on time and keeping your credit card balances low.

Foolish bottom line
Use these tips to help improve a credit score today. By acting on these strategies, you'll start taking advantage of all the benefits that having great credit affords.