Understanding what factors affect your credit score helps with creating a strategy to continually improve it. While some are chasing the elusive perfect score of 850, the key is to actively find ways to improve your credit profile and avoid the traps that lower your credit score. The easiest way to improve your credit score is to pay all your obligations and bills on time. Delinquent payments and collections have a severely negative impact on your FICO Score. If you’ve missed payments, you must get current on your debt obligations and stay current. Those current payments will move the past due payments off your credit report and improve your score. Paying off a collection account will not improve your credit score. If you can call the initial owner of the trade or obligation and negotiate getting this off your credit report, then pay. However, if the lender does not agree with a written notice that they will no longer report the trade as a collection account on your credit report, do not pay. The collection companies will take your payment and then sell your personal information to the next collection company who will then ask for the same payment which will never come off your credit report. If the collection account is an error, you need to contact the three credit reporting agencies and dispute the information. If the collection account information is accurate, you should wait seven years until the collection status falls off the report. If there is an event that makes it difficult to uphold your financial obligations contact the creditors directly and ask for help. They may close the account and place you on a program where the payments have been decreased but you will at least be able to maintain your credit score. Once back on your feet you can resume the normal payments. Another way to improve your credit score is to maintain outstanding balances equal to or less than 30% - 50% of the limit on all credit cards. As previously mentioned, high utilization lowers your credit score. In addition to maintaining low balances on credit card debt, pay off as much debt as possible while keeping the trade lines open. Do not close the accounts as it will reduce your credit availability and lower your credit score. Obviously use discretion because if there is an annual fee it should be closed given the availability of several credit products that do not require an annual fee. Also, do not open up several credit lines at once just to increase your credit availability. I advise you do this gradually. Opening a number of new credit cards you don’t need all at once will only hurt your score and ability to take advantage of 0% promotional interest which can be extended over a significant period if done strategically. It’s important to function with as little retail or consumer debt as possible. Low utilization boosts your credit score. If you’ve had trouble maintaining your credit and want to re-establish or improve your score, open one credit card and pay the balance off in full every month. Do not spend more than you have allocated for full repayment. If the card commitment amount is $500.00 charge $250.00 on the card and pay the entire balance off within the billing cycle. There will be no interest charged to the purchase since the outstanding balance was paid off within the billing cycle. This will help to re-establish your credit and improve your score. As your credit availability for this card grows from $500.00 to $1,000.00 use 40% to 50% ($500.00) and pay it off at the end of the month. It’s not required that you continue to borrower each month. However, consistent and responsible usage of debt will continue to increase your availability and improve your credit score. As mentioned, a diverse credit mix shows that your ability to responsibly manage multiple forms of debt. Therefore, your credit score improves as you continue to manage different types of credit obligations. However, this does not mean you need to find different types of loans to apply for to improve your score. This is not a reason to get into debt. The intent is to obtain an exceptional credit score and then move from using debt to cash or a debit card. The end goal is to have no consumer debt at all.