What's in a score? 

About 60 percent of people have credit scores of 700 and above. The best number to have is 720 or above. If your score is 720, there's really no need to try and raise it because lenders lump you in the same category as folks with a score of say 800 or 820. At 720, you are viewed as a safe risk and typically receive a loan without problem and at a low interest rate. However, if your number is below 700, it's definitely worth your time to try and pump it up.

Here is how Martin explains a FICO score is determined: 

• 35 percent Payment History: "Having a long history making of payments on time and no missed payments on all credit accounts is one of the most important items lenders look for."
  
  
• 30 percent Amount Owed: "This measures the amount you owe relative to the total amount of credit available. Someone closer to maxing out all their credit limits is deemed to be a higher risk of late payments in the future and this can lower their credit score."
  
  
• 15 percent Length of Credit History: "In general, a credit report containing a list of accounts opened for a long time will help your credit score. The score considers your oldest account and the average age of all accounts."
  
  
• 10 percent New Credit: "Opening several new credit accounts in a short period of time can lower your credit score. Also multiple credit report inquiries can represent a greater risk, but this does NOT include any requests made by you, an employer or by a lender who does so when sending you an unsolicited, "pre-approved" credit offer. Also, to compensate for rate shopping, the score counts multiple inquiries in any 14-day period as just one inquiry."
  
  
• 10 percent Types of Credit in Use: "Your mix of credit cards, retail accounts, finance company loans and mortgage loans is considered."

How to get your FICO score: 
 The Web site myfico.com will sell you a comparison of your three credit reports from the three main companies: Experian, Equifax and TransUnion along with your FICO score for $40. For this price you also gain access to a feature on the site that lets you create hypothetical situations, such as paying off a particular debt or paying credit card bills on time, etc., and see how such actions will affect your score.

Just like your credit reports, you have to buy your FICO score. Martin recommends buying a combo of the information. Because the score is compiled from your credit reports, you need to make sure all three are correct. Also, this format organizes credit information from each company side by side so it's easy to read.

You can buy credit reports separately from each company. The company will also provide you with a credit score. However, it won't be you FICO score, which is what you really need to know.

Boosting credit scores: 
 Although you can't raise your score overnight, you can do so fairly quickly. The scoring formula gives more weight to recent activity. So, even six months of "good behavior" will have an impact, demonstrating that you have cleaned up your act.

Because payment history comprises the largest part of your FICO score, making a habit of paying bills and other payments on time is obviously going to have the largest positive impact.

However, the fastest way to improve your score is to pay down balances. This lowers the amount of credit you're using relative to how much credit you have available to you. Remember, FICO scores reward people who use a smaller percentage of their available credit. Some people suggest never using more than 50 percent of your limit on any card.

Avoid opening a lot of new accounts at once - this makes lenders queasy - particularly if you don't have a long credit history. Many recommend not having more than five credit cards. If you decide to close some credit accounts, close the newer accounts first. However, don't close more accounts than necessary because this lowers your ratio of debt to available credit.

Rotate and use all of your cards - a dormant credit account will not help your score. If you do have a late payment, it's worth a call to the lender to see if they will remove this information from your records in a "goodwill adjustment." You can choose to dispute the late payment report. While it's in dispute, the item will stay on your credit report but not factor into your FICO score.

While there's no question that having a good credit score is essential, it's also important to point out that FICO scores do not take your age, income, assets or employment history into account. Specific lenders may pay closer attention to income, assets and employment history. Also, FICO scores treat all late payments equally. However, an auto finance company, for instance, can look at customized scores tailored for their industry. If you've been late on credit card payments but never missed a car payment, they may take this into consideration.

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