Your credit score and credit history have a big effect on your ability to get credit and how high your interest rate and other terms (like the size of your down payment) will be.

Here are some things you can do to improve your credit score:

1. Get your credit report and check it for errors

• Go to www.AnnualCreditReport.com and get your credit reports.
  Review it carefully for common errors like incorrect addresses, accounts you have paid off or closed that are reported as currently open, and reports of late payments or write-offs that you know are untrue.
• Remember that there are three major credit bureaus (Experian, TransUnion, and Equifax), and though the information they report is generally consistent, you need to at least initially pull your report from each company and check it individually for any mistakes.
• Under American law, you are entitled to one free credit report per year from each credit bureau, and are entitled to another free credit report from a credit bureau if a creditor denies you credit due to information reported by that bureau. The place to order your free annual credit report is www.AnnualCreditReport.com

2. Correct any errors.

• If you catch any errors in one of your three credit reports, follow the procedure given by that company to file a correction. Be sure to provide whatever supporting information is required, or your request will be ignored. If you play by the rules, you can get errors corrected and your credit score can rise significantly. Do not think that you or any company advertising credit repair can eliminate true information from your credit report.
• You are also entitled to explain past credit problems. If you suffered an illness, went through a divorce, or had some kind of personal disaster that explains some prior lapse in your otherwise clean credit history that you have recovered from, some lenders will take note of this when reviewing your credit report and this may mitigate the effect of the past transgression. Just remember that your explanation will stay on your report for a long time so think twice before you file one, and have a trusted friend read it over to see if it sounds professional and will do more good than harm.

3. Keep old accounts open

• Closing old accounts hurts your credit score. Lenders like to see long and happy relationships between you and your other creditors.
• In fact, rather than burying an old card in the back of your sock drawer, take it out every few months, make a small purchase, and then pay it off when the bill comes. This will make the card show up as an active account on your credit report.

4. Don’t open too many accounts

• The flip side of the previous advice is that you shouldn’t carry more than about 3 national credit cards (like Master Card, Visa, or Discover).
• Lenders use more than one formula for computing your credit score and having too many accounts is a red flag under certain commonly-used credit formulas.

5. Don’t use more than a third of your credit limit on any account.
Lenders get upset when they think you are getting close to maxing out your credit limit on any credit line, so here are three ways you can quickly improve your credit score:

• Pay down cards or credit lines where you are close to your credit limit. Aim to get each one down below a third of their credit limit.
• Alternatively, you can ask lenders to increase your credit limit – just don’t take the bait and use this as a license to increase your debt.
• Spread your borrowing across your accounts. A $6000 debt on a $6000 credit limit looks very bad to lenders, but a $6000 debt spread across three cards, each with a $6000 limit, while it is the same amount of debt, makes you look like a solid citizen.

6. Have a mortgage or car loan that you pay on time monthly

• Lenders like to see home ownership. Even if you pay cash for your home, a small mortgage with steady payments is going to give your credit score a big boost.
• If you are a committed renter, then taking out a small car loan and making a few months of payments will give a smaller but similar boost to your creditworthiness.

7. Pay on time.

• Make sure that you always make at least the minimum payment on every account well in advance of the due date so that you are not reported as a late payer.
• If you have a recent late payment, a history of on-time payments will make it start to fade away and your score will recover. However a 90-day late payment is a major black mark that will take longer to heal than a shorter lapse.