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Step 1
Navigate to the free credit report website. According to the law you are entitled to a free credit report (but not the credit score) from each of the three credit agencies once a year.
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Step 2
Click "Request Report." Then enter your name, address, Social Security number and date of birth, and click "Continue." Select all three credit bureaus and click "Continue." You will be redirected to the respective agency websites to obtain the credit reports.
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Step 3
Check the credit report for accuracy. Discrepancies such as extra accounts or incorrectly reported late payments would harm your credit history. Use the online forms (or call using the phone number given on your credit report to dispute incorrect information.
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Step 4
If errors are found in any of the credit reports, use the online dispute tools or call the phone number on your credit report to dispute incorrect information.
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Step 5
Pay your credit card bills (at least the minimum payment) and loan installments on time. This step is crucial in improving your credit history.
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Step 6
Calculate the ratio between an outstanding balance and the credit limit for each revolving credit card account using the formula Ratio = 100 x balance/credit line. For instance, if the credit limit on your card is $7,000 and the balance is $4,500, the ratio is 100 x 4,500/$7,000 = 64.3 percent.
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Step 7
Repay your debt to bring the ratio calculated to 30 percent or below for each credit card. For example, you have $3,000 to repay the debt on two credit cards with account balances of $2,000 and $4,000, and the respective credit lines of $8,000 and $5,000. According to Step 5, the balance-to-credit line ratio is 25 and 80 percent for those credit cards. Thus, it is better to make a $3,000 payment toward the second credit card.
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Step 8
Avoid debt consolidation on one credit card account. The consolidation likely will significantly increase the balance-to-credit limit ratio and negatively influence the credit score.
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Step 9
Avoid closing credit card accounts with a zero balance. Note that the ratio "total debt (all accounts)/total credit line (all accounts)" is another factor that determines your credit score. Accounts with a zero balance decrease that ratio and increase the credit score.
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Step 10
Sign up to monitor your credit score to see the improvement in your credit history. Virtually all credit card companies offer identity theft protection programs with credit report monitoring. Call a customer service number on the back of your credit card and ask about such a program. This step is optional since it is always a fee-based service. You will be charged between $10 and $20 per month to get access to your credit score.
