Your credit score is a number assigned to you by credit bureaus that determines your “creditworthiness” and influences the rates you get for mortgages, auto loans, and credit card terms. You can save thousands of dollars on a loan—and even insurance premiums—by boosting your credit score. Here are a few ways to do so.

Understanding the Score and Important Factors

As the pie chart in the image above shows, there are basically five things that influence your credit score: your payment history (if you’ve payed on time or have a history of paying late), amount of credit you carry, how long you’ve had credit accounts, how long ago it’s been since you opened a new credit line, and the kinds of credit you have.

Have many years of on time payments—and few past due items on file—will be the biggest factor for a good credit score, so set up those automatic payments and get current.

The second most important factor is amount owed. Keep low balances on your accounts; we’ve mentioned before the 20-percent rule for maintaining a good credit score: keep the amount you owe below 20% of your overall limit. Closing unused credit cards won’t raise your score, but can actually hurt it, because it will throw off the debt-to-available-credit ratio.

Time Moneyland writes that credit is becoming tighter these days, so much so that a score of 750 is now almost like having a score of 680, but there are still three things you can do to boost your score even if you already have a good one:

  • Contest your credit score and dispute incorrect reports from the major credit bureaus if the reports’ assessments don’t make sense
  • Use some credit regularly and pay it off, so you show yourself to be creditworthy.
  • Don’t charge too much on one card. Keeping the 20% rule in mind, you don’t want to put too much on one card, but spread the utilization around. If you’re in the market for a loan, use credit more sparingly just before applying for the loan.
  • The myFICO site offers additional tips for improving your credit score including not opening a lot of new accounts too rapidly and doing your rate shopping within a short period of time, so those credit inquiries will be seen as one search.

    If you have any other tips for raising your credit score, share them with us in the comments.