If you take the following steps you are “guaranteed” to see your credit score improve over the next 12 months:
1. Think before you buy. If purchasing something on credit will take you two years to pay off, “it’s not worth it.”
2. Don’t max out your credit cards. This goes back to the “30%” of your credit score that depends on the ratio between credit used/credit available. The smaller the percentage, the better your score.
3. Pay your bills on time. According to FICO, if your credit rating is an excellent 780 and you are 30 days late in making a payment, it can shave as much as 110 points off your score. If the same mistake were made by someone with a credit score of 680, it would only knock 60 to 80 points off.
4. Do not apply for new credit cards. Every time you do the issuer runs a credit check. Each inquiry shaves points off your score.
5. Don’t forget about old credit cards and use every card at least once a year. Pay the amount you charge in full (and on time) or the issuer might close your account due to inactivity. That would hurt your credit used/credit available ratio.
6. Check your credit report at least once a year to make sure the information is up-to-date and accurate. Unfortunately, a Western Union survey conducted earlier this year found that 1 in 4 consumers have never checked their credit score.