1. Pay your bills on time. Your payment history is the single most important factor in determining your credit score. In fact, it accounts for approximately 30-40% of the total score. Of course, recent history is more important than what happened five to ten years ago. Therefore, the most important thing you can do to improve your credit score is to start paying your bills on time right now. Late payments can absolutely destroy your credit score and missing even one payment can drop your score by as much as 100 points.

2. Pay down your debts and reduce your credit card charges. Lenders like to see that you have not used up all of the available credit you have been given and consider someone who is "maxed out" on of their credit cards to be very risky. The ratio of your balance to credit limit is referred to as card utilization. To calculate your utilization, add up all of your credit card balances and divide that number by adding up all of your credit card limits. The more debt you pay off, the more utilization you will have and the better your credit score will be.

3. Don't close paid-off accounts. This one may sound counter-intuitive, but closing your accounts does not help your score and usually hurts it. As mentioned above, creditors like to see that you are not using everything that is available to you. By shutting down credit accounts, you lower the total credit available to you, which makes any balances you have higher in relation to your total lines, thereby increasing your utilization and decreasing your score. Also, if you close your oldest accounts, it can shorten the length of your reported credit history and make you look like you have a shorter credit history.

4. Don't open new credit accounts. Every time you open a new

Money Can Buy Happiness
People's emotional well-being -- happiness -- increases along with their income up to about $75,000, researchers report in Tuesday's edition of Proceedings of the National Academy of Sciences.

Survey: Teenagers Are Sleep Deprived
Parents who have to drag their kids out of bed for school may consider this advice from Dr. Jason Eberhart-Phillips, the top health officer in Kansas. He says teenagers don't get enough sleep -- they should be sleeping nine or 10 hours per night. But studies indicate that very few do. He suggests the state should push back the starting time for classes.

5. Avoid filing bankruptcy. Finally, you should not file bankruptcy unless you absolutely have to because it can drop your score by as much as 200 points. Recovering from a bankruptcy can be extremely difficult. Once a score drops below 640, which bankruptcy most likely will, credit becomes difficult to obtain and you will be given much higher interest rates. High-interest rate lenders love recent bankruptcies, because they know consumers aren't allowed to file again for another seven years. Most conventional lenders, however, generally will reject consumers with a bankruptcy on their record. Bankruptcies are generally reported on your credit report for 10 years.

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About the Author

Don Blackhurst is the co-founder of TrimYourDebt.com (http://www.TrimYourDebt.com), which provides free budgeting tools, debt planning, and credit help. He has been working in the banking and finance industries for over 16 years and has an MBA with an emphasis in Finance and Econometrics.