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Like it or not, our society today revolves around credit. Not only does your credit rating affect the rate you pay on your credit cards, car loans and mortgages, but it may also impact your insurance rates and, based on current studies, even your chances of finding a mate.You have three different credit scores, one from each of the credit bureaus: Experian, Trans Union and Equifax. Each uses some variation of the model created by Fair, Isaac & Company (FICO), and your score from each may vary slightly. As a result, most people simply refer to their FICO Score.One of the questions we often get is how to improve a credit score so, with credit to David Letterman, here are the Top 5 steps you can take to improve your credit.Number 5: Correct blatant errors.Your score is only as accurate as the information provided to the credit bureaus. You should review your report from all three bureaus for accuracy at least once a year or before you apply for a loan. If you find any errors, report them to the appropriate credit bureau as soon as possible. Most credit bureaus allow you to pull your score once per year for a nominal fee, or you can sign up through the credit bureaus to be notified of changes in your score.Number 4: Don’t close all unused accounts.This one may seem counter-intuitive, but one of the factors they look at is your balance-to-limit ratio. If you close out accounts without reducing the amount of your debt, your ratio of debt to your available credit increases and could lower your score. Also, if you have a relatively short credit history, closing old accounts will lower the average age of the account, also potentially reducing your score.Number 3: Reduce credit card balances.One of the big factors in calculating your score is how much money you have on your credit cards relative to your total credit limit. Generally, you should try to keep your balances at or below 25 percent of the available credit limit.Number 2: Pay off debt rather than transferring it.Instead of transferring your debt from one card to another and then closing the first account, leave both accounts open and pay down the debt. This will improve your balance-to-limit ratio.And the Number 1: Step you can take to improve your credit… Pay your bills on time!Seems like a no-brainer but it can be particularly important in the months prior to your applying for a loan. A late or missed payment in the last few months will have a greater negative impact on your score than one three years ago.Improving your credit score is certainly not an overnight process. It takes time, dedication and discipline to achieve the goal but, like losing a few extra pounds, it can be done.

Written by Rob Jupille

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