Here’s what you need to do if you want to build a strong credit score:

• Begin building a credit history as early as possible. In other words, don’t wait until you’ve graduated from college to begin worrying about your credit score. Instead, when you turn 18 and are gainfully employed, begin by establishing your credit with a secured credit card or a retail credit card. Make paying those credit cards every month an absolute priority and never, ever miss a payment. Keep your debt to a minimum and you can expect your credit score to begin taking shape rather quickly.
• Pay for purchases with plastic. The only way to really build a strong credit score is to show the credit reporting agencies that you can manage your credit well. And to do that, you need to charge and charge often. Since you are going to be charging purchases, consider a rewards credit card that will pay you back in the form of cash or points for making purchases you would have made anyway. However, it is vital to make paying those cards off each month a priority so you don’t begin to accumulate debt.
• Be careful about having too much credit. Although the only way to begin building a strong credit history is to start spending on credit cards, applying for too many credit cards at one time may raise a red flag with the credit reporting agencies that you are not acting responsibly in terms of your finances. Therefore, keep the cards to a minimum.
• Monitor your credit score on a regular basis. A strong credit score is often dependent upon the accuracy of the information contained in it. Therefore, in order to ensure you are maintaining a strong credit score, it is best to order a copy of your credit report at least once a year to check for any errors or discrepancies.

Your FICO score is determined using a number of factors including: your payment history; the total amount of your debt; the length of your credit history; how much new credit you have; and what type of credit you carry. Although the importance of each of these factors varies a bit, it is known that the amount of debt you have makes up about 30 percent of your FICO score, thereby making it a very important factor to consider.

What to Consider

The amount you owe includes: the number of debts you have; the types of debt you have; and the amount of debt on those accounts. One of the main factors considered when determining this portion of your FICO score is your credit utilization ratio, also commonly referred to as the debt-to-income ratio.

The credit reporting bureaus will also consider the lack of a certain type of loan or the amount of credit you have with revolving lines of credit, such as credit cards. They will also pay close attention to installment loans, as well, such as car loans or mortgages.

Why Debts Matter

Your debt levels matter when it comes your FICO score because creditors will examine the amount of debt you have compared to your income. They will also compare the amount of available credit you have. In other words, if you have three credit cards with a total available credit of $30,000, and you only have $3,000 in debt, you will likely have a high FICO score to reflect this. However, if you have $30,000 and your debt totals $25,000, your available credit will be low, thereby lowering your FICO score.

If you want to maintain a strong FICO score, you will want to pay close attention to the amount of debt you carry at any given time. It is always best to have a variety of loans on your credit score, such as credit cards, home loans or car loans, but it is also best to keep your debts to a minimum.

Your credit report is more than just a number. In other words, it is important to identify and view a number of things on your credit report so you can be sure you are doing everything you can to ensure a strong credit score.

If you want to be sure your credit report stands up to scrutiny, here’s what to look for:

• Late payments – Any lender or creditor can (and often do) report your late or missed payments to the credit reporting bureaus. And every time one of these reports is made by a creditor, your credit score takes a hit. In fact, by most standards, it appears that late payments can lower your FICO score by as much as 35 percent. It is also important to understand that not all late payments are created equal in the eyes of the credit reporting agencies, so the longer you take to pay and the frequency at which you fail to pay on time will adversely affect your credit score.
• Amount of credit – Although the key to a strong credit score relies on taking on credit, too much credit is never a good thing. Called a debt-to-credit limit ratio, the amount of debt you have in relation to the amount of available credit you have can either help or hurt you in the eyes of creditors and the credit reporting agencies. In short, keep your debt to a minimum so you can be sure creditors will not see you as a credit risk.
• Judgments, Bankruptcies and Liens – Although your credit past plays a big role in your credit report, so do any bankruptcies, liens and judgments.  In other words, any public record against you will likely appear in your credit report, which may negatively affect it.
• Closed accounts – A closed account will have a negative effect on your credit score, at least for a short period of time. This is because your debt-to-available credit will be lowered upon closing an account. If you feel you must close an account, by all means do it; otherwise, avoid closing accounts, especially in the months preceding a loan application.

Here’s what you need to know:

• Every time you seek credit, the lender will look at your credit report. Simply put, there is no way to get around a poor credit score because lenders use this information to make a determination about your credit worthiness.
• All of the three, major credit bureaus in the United States track your borrowing behavior. Experian, Equifax and TransUnion all keep detailed records of your borrowing history. So, every time you are loaned money, the details of that loan will be present on your credit report. It will detail the amount of the original, the current balance of the loan, and the payment history on the loan.
• Your credit report includes a plethora of financial and personal information, including your account history, your balance, your monthly payment, your payment history, your payment status, information from public records, tax liens, monetary judgments and even overdue child support payments. So anytime a lender or creditor pulls your credit report, he or she is essentially getting a snapshot of your life.
• Not all credit report information is accurate, and mistakes found on your report can cost you big. The three credit reporting bureaus are not immune to mistakes or inaccuracies. As such, you could have inaccurate information appear on your credit report; information that could ruin your chances of obtaining credit. Because of this, it is vital that you periodically check your credit report for inaccuracies or other errors. If any inaccurate information is found, it is up to you to immediately contact the appropriate credit reporting bureau.
• The Fair Credit Reporting Act entitles everyone to receive a free copy of their credit report once every 12 months. You are also entitled to a free copy of your credit report if you were denied credit for any reason.

Here is what you can expect if you fail to make a credit card payment:

• You miss your due date – You will likely receive a few, polite phone calls to remind you of a missed payment.
• You are 30 days past due – Someone who is 30 days past due on their account will have likely missed the payment before the next billing cycle rolls around. In this case, the creditor will likely use “soft tactics” to receive their payment. You may expect to receive phone calls, emails and letters, although all of these tactics will be decidedly patient and helpful. Once 30 days has passed without a payment, the creditor will likely report you to the credit bureaus as delinquent.

Now is a great time to ask your creditor to help you find solutions to your financial problems. During this stage of the game the creditor will likely negotiate more manageable payment arrangements with you. Don’t, however, avoid the creditor and ignore the problem; it will only make things worse.

• You are 60 days past due – OK, now things are really starting to look bad. You’ve missed two billing cycles and the creditor has almost certainly reported your account as delinquent to the credit reporting bureaus. Plus, they are also likely not so nice anymore. Most creditors will issue a warning telling you that if you don’t pay on your card it could end up in serious delinquency.

It’s not too late to talk to your credit card company about working together to find a solution to your credit card woes.

• You are more than 90 days past due – Many creditors will simply write off the debt as a charge-off if you fail to pay for three or more months, meaning that it will go to a third-party collections agency who will, no doubt, employ more aggressive tactics to get their money.  Your debt with the creditor could ultimately be brought to court, as well, resulting in wage garnishment.

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• The Fair and Accurate Credit Transactions Act (FACTA) allows consumers to order a copy of their credit report from all three, major credit reporting agencies (Equifax, Experian and TransUnion) once every 12 months. The easiest way to claim a copy of your credit report is by visiting www.annualcreditreport.com and filling out the Annual Credit Report Request Form found there. You must request your free credit reports through annualcreditreport.com, and not through the individual credit reporting agencies.
• Under the Fair Credit Reporting Act, you are entitled to a free copy of your credit report, from the three, major credit reporting agencies if: you have been denied credit; if you have been denied employment because of your credit; if you have been denied housing because of your credit; or you are forced to pay a higher insurance rate because of your credit.
• Under the Fair Credit Reporting Act, you are also entitled to a free copy of your credit report from all three credit reporting agencies if you placed a fraud alert on your credit report or if you are a victim of identity theft.
• Under the Fair Credit Reporting Act, you are entitled to a free copy of your credit report if you were involved in a dispute regarding your credit report. A good example of this is if you find inaccurate information on your credit report and the appropriate credit reporting agency changed the information on your report to reflect the inaccuracy. Once the investigation has ended, you are entitled to a free copy of your credit report to make sure your updated credit report reflects the changes. Remember that, under the Fair Credit Reporting Act, the credit agency in question must address and settle your dispute within 30 days.

• Library fines – Some libraries will send your overdue fines to the credit reporting agencies. Surprised? Because these types of fines are most commonly ignored or forgotten, municipalities have gotten smart and started reporting individuals to the credit reporting agencies.
• Parking/speeding fines – Municipalities are also getting into the game when it comes to parking and speeding tickets. In fact, it is becoming quite common for municipalities to report these unpaid fines directly to the credit bureaus. As a result, many individuals take these fines much more seriously.
• Cell phone bills – Although the regularity at which cell phone companies report missed payments to the credit agencies depends on the service provider, it is true that many cell phone providers have begun forwarding this type of information onto the credit reporting bureaus. Many cell phone providers report unpaid cell phone payments as credit accounts, thereby immediately affecting your credit score.
• Child support – The Fair Credit Reporting Act treats child support like any other type of debt. As a result, courts furnish child support payments – whether on time or delinquent – to the credit reporting agencies. However, it is important to note that, although child support payments are recorded on credit reports, they do not affect an individual’s FICO score. Keep in mind, though, that an employer may look down upon someone who shows delinquent child support payments on their credit report.
• Utility payments – If you fail to pay your electric bill or your water bill, expect the company to furnish this information to the credit reporting agencies. Although a missed payment or two will not likely get reported, if you are consistently past due, you may find this information on your credit report. In short, it is important to treat all bills – not just loans and credit cards – equally because they may all play an important role on your FICO score.

Because of the importance of a strong credit score, it is vital that you order a copy of your credit report, from all three credit reporting agencies, at least once a year so you can thoroughly review your credit report. If you find any inaccuracies or omissions, it is important to immediately contact the appropriate credit reporting agency.

Here’s how to do it:

• As soon as you spot an error, contact the appropriate credit reporting agency and submit a dispute. Provide the credit bureau with an explanation, in writing, of what you believe is inaccurate information. Any information you can provide the bureau with, such as credit card statements, to support your claim, will be helpful. Don’t send originals, though; make copies and keep the originals. Send your letter through certified mail and ask for a return receipt. Before you send any information, make copies of everything, including the letter, for your records.
• Under the Fair Credit Reporting Act, the credit bureau must investigate your dispute within 30 days. If they are unable to verify the information contained in the report, they must remove it from your credit report.
• Once the investigation has been completed, the credit bureau in question must then provide you, in writing, with the results of their investigation, along with another copy of your credit report showing the updated information.
• If you request it, the credit bureau must also provide an updated credit report to anyone who received your credit report in the last, six months. In addition, if an employer requested a copy of your credit report in the last, two years, you can request that the bureau send them a copy, as well.
• If you are unable to resolve a dispute with the appropriate credit bureau, you can still request that the bureau include the copy of the dispute in all future credit reports.

You may think that your credit score is picture-perfect; after all, you have a few credit cards and you manage to pay on them every month. So, what’s the problem? The truth is that there may be things you aren’t doing that are putting a dent in your credit score:

1. You aren’t using your credit card – Many of us think that because we have a credit card we automatically have good credit, but this just isn’t true. An open credit card is a good first step, but in order to establish a solid credit history (and therefore bump up your credit score) you must spend on the card regularly. What many people don’t know is that simply making a purchase or two each month is enough to begin building a strong credit score.
2. You aren’t looking at your credit report – What you don’t know may hurt you, especially when it comes to your credit report. Any credit report could have a number of errors or discrepancies that can damage the best credit score. It is therefore important that you make a point of ordering a copy of your credit report at least once a year so you can review it carefully and check for any errors. Of course, if you spot anything that doesn’t look right, it is important to immediately contact the appropriate credit reporting agency and submit a request for an investigation.
3. You aren’t paying attention to your credit card’s due date – The only way to ensure a strong credit score is by paying your credit card on time, each and every month. Many people think that failing to pay their card on time every once and a while won’t harm their credit score, but the truth is that even one missed payment can put a dent in your credit score and open up the possibility of your credit card company raising your interest rate.
4. You aren’t paying down your credit card balance – Paying the minimum balance just doesn’t cut it when it comes to building a strong credit score. The credit reporting agencies see large credit card balances for extended periods as a red flag, as it often indicates you are spending beyond your means. Keep your spending in check and pay those credit card balances down every chance you get.

• Opening too many accounts in a short period – Although opening a new credit card account certainly won’t damage your credit score, opening two or three could. If a lender notices that you have been opening many accounts or lines of credit in a short period of time, it may raise a red flag that you are in financial trouble.
• Selling your home through a short sale – Although many homeowners are told that a short sale won’t hurt their credit score, the truth of the matter is that the loan is reported to the credit reporting agencies as a “settled” loan. In other words, a short sale is just as bad in the eyes of the credit reporting agencies as a foreclosure.
• Signing for someone else’s loan – Although you may think you’re simply doing a good deed for a friend or family member by helping them obtain credit, the truth is that this debt goes directly onto your credit score, thereby raising your debt amount and lowering your chances of getting the best rate for any number of things, such as a car loan or a mortgage.
• Paying only the minimum balance – Although it may seem like you’re doing the best thing by paying on your card each month, paying just the minimum balance could raise a red flag with a potential lender because it may signal that you’re under financial stress. In other words, the chances of getting approved for more credit are unlikely because many lenders view your financial health as shaky.
• Taking out a cash advance – If there is one bit of good advice to remember when it comes to your credit card it is: Avoid cash advances at all costs! If you are in an emergency situation and you absolutely must get your hands on cash, then by all means use it. But don’t use a cash advance as simply a way to get easy cash! Cash advances are not viewed favorably in the eyes of the credit reporting agencies and lenders, so it is best to always avoid them.