That's the first step. Understanding it.

It's a 3 digit number from 300-950 and it is basically a grade that is given to your credit history. That grade tells lenders like banks, mortgage companies and car loan companies how risky you are as a borrower.

How is the Score made up?

There are lots of pieces of information that are put into figuring out your score.

• How long have you had credit: If you can show through your report that you have had credit for a long time, then that is helpful. It shows responsibility.
• How many open accounts to you have: (Those are accounts that you are still paying on or have available credit on)
• Public records such as bankruptcy
• Payment History: How many late payments have you made? are they recent?
• Number of Credit Checks: If you are applying for a lot of credit that will show up on the report.
• What kind of credit?: Have you only had credits cards? Or have you also had a mortgage, or a car payment too. This is similar to the "How long" question above. If you have had different types of credit then you have more experience with credit and are less likely to have bad credit.
• How much debt do you have now? This makes sense as the credit companies want to judge whether you will be able to repay them.

General categories that your score puts you in:

• Prime borrower: A prime borrower is someone with a credit score over 680. If you have a score like this then your chances of getting good rate improve dramatically.

• Sub-prime borrower: So now if your score is below 680 you might be considered "sub-prime". If you are in this category then you can still get credit, but your interest rate may jump up a bit, so the credit will cost you more.
• Shafted: I hate this designation, but that is what it is called. This is when you are below 560. In the eyes of credit companies such as credit cards, auto loans and mortgages you are high risk. Your rate will go up substantially or you may have to pay increased points or upfront costs on a loan.

Make your payments. And do it on time. Late payments will hurt your score.

Can you pay down the balances? If yes try to do that. A lower balance will help your score. You particularly want to focus on the credit cards. Those are the revolving credit balances and having a high balance there can lower your score.

Review your credit report: See if there is something there that shouldn't be. Someone else's bad credit might be there. Dispute it if it is wrong.

Do you have unused credit that just sits there? I used to have old unused credit cards from stores sitting on my credit report. I improved my score by getting them off the credit report.

Remove negative items on your report: You can get these removed if they cannot be verified. This can be done yourself or you can hire someone to do it for you.