Our new economy now requires a credit score of 700 and above if you hope to get ahead financially. A 650 credit score is now considered marginal. If you want to prosper, your main objective should be to get your credit score to at least 700 points as soon as you can. There are some effective steps you must take to improve your credit score. Forget about the gimmicks you see advertised everywhere. Especially, watch out for the “Free Annual Credit Report“online scam. You can get a free report but there is only one government authorized free annual credit report. Here are my 5 tips to a better credit score and where to get your free report.

We begin with finding out exactly where your credit score stands right now. Our first step is to obtain a copy of your credit report. This report contains your complete credit history, every financial transaction, what you bought, what you rented or leased, all your loans, and payments to credit cards and utility companies. Everything is revealed showing the amounts you paid, the dates you paid, who was paid, and, most important, if you are up to date as agreed.

Let me walk you through 5 tips. You should jot down some notes about what you need to do with your report when you get it.

1. You will look for charges that are not yours.

This is perhaps the quickest way to improve your score. You want to object to anything that is not being correctly reported. It does happen. I caught errors and gained 10 points on my score immediately. For each error you find, contact the business or person who reported you to the credit bureau but you must be able to prove the charge is not yours. If you can prove your case, you can challenge each error in writing to the credit bureaus. Tell them why the mistake should be corrected. They are bound by law to investigate and report back to you, usually within 30 days of your challenge. Once you clean up your report, I suggest you sign up for a credit monitoring service. They are cheap, about $30 a year. You get monthly reports plus immediate alerts when anything appears on your credit report. It is cheap insurance to keep an eye on your credit.

2. You will look at your payment history and fix it if needed.

Your report will show what they call “aging.” This is your payment history shown in 30-60-90 day late payment increments. Get those cleaned up first by paying them up to date and keeping them paid up to date from now on. Late payments are one of the worst things you can do. Those late payments cause points to be deducted.

You will lose a lot of points when collection agencies have been after you or you have gone bankrupt. Collections are a major problem that will take a personal phone call from you to make arrangements to clean these up. But, as for bankruptcy, that will be on your record for up to 7 years and you cannot get that erased unless it is a legitimate error. All you can do is off-set bankruptcy by building a good credit history that shows you are now a responsible individual.

3. How much of your available credit are you using?

One of the biggest warning signs for creditors is how much credit is available to you compared to how much of that credit you have used. In other words, if you have $10,000 available to borrow and you have borrowed more than half the amount, you look over-extended on credit. It looks suspicious even if you are paying your bills on time. You should get your credit owed down to 50% or less of what you have available before you ask for more credit.

Keep in mind that your credit limit is based on your credit score which includes: salary or steady employment income, monthly living expenses, and your history of paying your bills. It is a secret formula they use to calculate your score which is why you never want to max out your credit limit even if you pay your bills on time.

4. From now on you will not give your social security number immediately when applying for credit.

Every time a lender contacts the credit bureau, that contact shows in your credit report. Multiple searches can look suspicious to potential lenders. Here is what I do. Before I even apply for credit I do my research into interest rate, fees, and charges in advance. If I like what I see, I will tell them everything they want to know except my social security number. The number I will provide is my credit score and ask them to base my worthiness on all the information I have provided and on my score. If they agree to grant me credit, I provide my social security number to seal the deal. This practice has served me well. No potential lender has ever refused doing it my way.

5. You will patiently get your financial house in order.

It will take some to build a great credit history and FICO score. You start with the foundation as outlined above in 1. and proceed patiently to reach your objective. Depending on where you are today, it may take a year or more to get your score to over 700 but it is worth the time and effort. Once your house is in order, many financial doors will open to you, that are now closed.   

To get your government authorized free annual credit report, search the web for Federal Trade Commission-Annual Credit Report.