The secrets to improving your credit score

1. Keep your balances low and your credit limits high. 
The best scores go to people whose keep their credit card balances at 30 percent or less of their credit limit. One of the quickest ways to boost your score is to call your credit card company and ask for an increase in your credit limit, advises Dean Wegner, a certified credit counselor and mortgage lender in Phoenix. If you have a $2,000 balance on a $4,000 limit and you raise that limit to $8,000, you just shrank your percentage of credit used from 50 percent to 25 percent and gave an almost instant boost to your score.

Of course, it defeats the purpose if you then charge more on that credit card. Reducing a 100 percent balance to 50 percent by increasing the available limit can boost your score by 10 to 20 points, Wegner says.

"(Raising your limit) has the same effect as if you wrote a check to get it down to 50 percent," he says.

Even if you don't charge more the card, it may be harder to get credit-card companies to raise limits in today's tough economic environment. In fact, many card issuers are lowering limits, even for people with good scores.

2. Don't use more than 50 percent of your limit on a credit card or line of credit. 
Along those same lines, using more than 50 percent of your available credit will hurt your score, says Jim Calimopulos, a manager at Brooklyn, N.Y.-based mortgage broker Fort Funding Corp. Of course, keeping your balances below 50 percent is easier said than done. And it may get harder as wary banks and credit-card companies lower credit limits in the wake of the banking fiasco.

Calimopulos paints this helpful scenario: "Say a consumer has three credit cards, each of which has a limit of $5,000. He has a total balance of $15,000. He's used 100 percent of his available credit. If he pays off one card and cancels that account, he has a $10,000 balance, but he has still used 100 percent of his credit."


Instead, this consumer should pay off that $5,000, then cut up the card and keep it active rather than closing it, Calimopulos says. Now the person has used only 67 percent of his available credit -- a far better scenario when it comes to credit scoring. But Calimopulos stresses that you cut up that card "to avoid the temptation of using it."

3. Build your credit history. 
Keeping an old account open can benefit your credit history in the long term. That's because 15 percent of your FICO score -- the industry standard -- is based on the length of your credit history.
What makes up a FICO score?

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