Your credit score is a three-digit number that has the power to make or break your dreams. If you wish to buy a new house or a new car, you may eventually consider applying for a loan. Lenders would run a background check to determine whether it is safe to allow you to borrow money and to determine this, they will check your credit score. A credit score ranges between 300 and 850.

Improving your credit score is not an overnight task; it requires research, patience, and development of appropriate financial habits. Though your credit report won’t improve right away, the damage it did to your financial credibility can be restored over a period of time. By following 10 effective commandments diligently, you can work your way towards improving your credit score.

Check whether the credit reports are accurate: People often disregard the fact that even credit bureaus can make mistakes when creating credit reports. So, the first step to boost your credit score will require you to thoroughly check your credit reports. Everyone receives three credit reports, one each from the 3 major credit bureaus— Experian, Equifax, and TransUnion. According to a 2012 study from the Federal Trade Commission, 1 in 5 consumers had an error in at least one of their credit reports. This is why, when you are trying to improve your credit score, you should begin by checking how accurate the reports are. This will give you a fair idea about where to start and what measures to take.

Create a plan to boost your credit score: If your credit report is accurate, the next logical step will be to devise a plan to improve your credit score. The report will provide you ample details about the areas you need to pay attention to in order to boost your credit score. To begin, you should aim to keep your credit card balances on the lower end along with any other type of revolving credit that you may have. Moreover, you can start paying down your debt rather than move it around. This will help you streamline your process of getting your finances in order.

Make timely bill payments: Your financial habits are often used as parameters by lenders who gauge your credit score before approving your loan. So, if you wish to boost your credit score for a mortgage in the future, you can make it a habit to pay all your bills on time. Making late payments or settling an account for less than what you had originally agreed to pay can have a detrimental impact on your credit score. But, it is not just credit card bills that you need to regulate but also try to cover your rent, utilities, and phone bills. Though late or missed payments will appear on your credit report for the next few years, its impact will decline over time. So, ensure that you pay all your bills on time without fail.

Apply for new credit accounts only if it’s necessary: Do not try to resuscitate your credit scores by opening new credit accounts only with this intention. It might have an opposite effect and you might end up harming your credit score in multiple ways. For instance, for the new credit accounts that you may plan on opening, there will be hard inquiries on your credit report. You may also be tempted to overspend, and this will inevitably lead to debt accumulation over time.

Don’t get rid of unused credit cards: If you feel that getting rid of your unused credit cards can boost your credit score, that’s a misconception. It is advisable to let them be; keep the unused credit cards open unless they are costing you money in the form of annual fees. This is an extremely smart way of improving your credit score because if you close the account, it can increase your credit utilization ratio. If you decide to close any consumer credit account, it is essential that you try and maintain a 15 percent utilization without having that particular credit card. If not, you will have to consider other options pertaining to that credit card account, such as replacing that account with a new one to keep up with the good credit utilization ratio.

Try to build a strong credit age: In case you have a short credit history, you won’t have much scope for improving your credit score. In such situations, you will have to piggyback on a family member or a friend’s credit card if they have a long history of timely payments. You can get them to add you as an authorized user and make on-time payment to boost your credit score. It can be difficult to find someone who’s willing to let you share their credit score as it can become a liability if things don’t work out. In such cases, you can wait it out and not close any accounts. A good average age of credit history is about five years. So, try to retain your account until then.

Clear up any pending collection accounts: One of the major mistakes people make while trying to manage their debt is repeatedly transferring it to their new accounts. Instead, you can contact a debt collector who is listed on your credit report and inquire whether they are willing to stop reporting the debt to each of the major credit bureaus in exchange for full payments. Doing so might be a violation of some of the collector’s agreements with the credit bureaus, but it does work at times. Also, if it’s a debt that you aren’t aware of or if it seems inaccurate, you can dispute it with all the three credit bureaus. It can get removed and your credit score will improve at a faster pace.

Don’t ponder over old mistakes: If you have ever filed for bankruptcy due to a major financial mistake, went into foreclosure, or suffered through a short sale, it will have a detrimental impact on your credit score. In such cases, people often wait for this misery to end and disappear from their credit report. But, it is essential for you to know that the impact of these instances will diminish over a period of time as the federal laws tend to limit the period till which such financial disasters can affect you. So, do not let your past financial debacles affect your efforts to boost your credit scores.

Opt for a secured credit card: To boost your credit score, you can opt for a secured credit card. With this type of credit card, you can make a deposit into a checking account that secures the line of credit which the bank or lender is extending you. You can also get a secured credit card even with bad credit, and adding a new account with a better payment history will be just the thing you would need to boost your credit score. In case you default on the payments on a secured credit card, the deposit that you made will be used to cover the balance on the card.

Work on your credit utilization ratio: While trying to boost your credit score, pay attention to the credit utilization ratio. If your credit card balance exceeds more than 30 percent of the credit limits, then your credit score will take a hit. Even if you pay your bills on time, the excess credit bill can affect your chances of improving your credit score. In such cases, you can consider pre-paying some of the balance so that you don’t cross the 30 percent mark for that month.

Though these measures will prove effective in helping you boost your credit score, it is essential to maintain responisble financial habits, as a slight misstep can derail your credit score right away.