Your credit score is one of the most important factors in your financial life. This three-digit number will often be the deciding factor when it comes to a money lender deciding whether to help you out with a loan or credit. The higher the number, the more likely you are deemed to be able to repay the money borrowed on time and the more chance you, therefore, have of getting credit.

If your current credit score is not where you want it to be, you’re not alone. There are countless of American’s who have found themselves in financial strife and are paying the price for it by being unable to borrow on favorable terms.

There are several steps that you can take to improve your credit score to give yourself a better chance of being able to borrow in the future. Focusing on the following areas can help set you on the path to an improved financial standing.

Pay your bills on time

When lenders review your credit score, one of the areas that they are most interested in is how reliable you are at paying bills. If you’ve got an excellent history at always paying money back at the agreed time, then that suggests that a lender can expect to receive what they are owed when they are owed it with no problems in the future.

According to a study by the Urban Institute, one in three American’s with a credit file has been reported for nonpayment of a bill. That’s bad news for their credit rating. Whether it is a medical bill, a credit card bill, a mortgage payment of even something as seemingly meager as your cell phone bill or an overdue library book, you should ensure that you are paying everything you owe on time.

You should take advantage of all the tools available to you to do this, such as setting up regular payments to your creditors through online banking. Calendar reminders can give you a nudge in the right direction every month when a bill is due – and if you’re already behind on payments, then do your best to overpay and catch us as soon as possible.

Pay off your credit card debts

Another aspect of your credit rating that potential lenders will look at is your credit utilization rate. This informs them how much of the credit you have available to you that you are currently using – the lower the percentage, the better. By using less credit, you appear more on top of your finances and know how to use credit well. The more credit you use, the more you’ve borrowed which suggests that you could struggle to pay it off – especially if you keep borrowing.

You can work out your credit utilization rate quite easily. Simply take how much you currently owe on your credit cards and divide it by your credit limit. If, for example, you have $5000 of credit available and have used $2500 of it, then your credit utilization rate is 50 percent.

Lenders typically like to see rates of under 30 percent. You can achieve that by paying down as much of your credit card debt as possible to get it under that ratio. One way to do this is by using a bad credit installment loan, which is a loan which is taken out with the purpose of using it to pay off credit. If that is something that you feel could help improve your credit score, then click on this link to find out more before you decide.

Limit the number of credit accounts you use

One of the great myths when it comes to how to improve your credit score is that taking out multiple cards can help. The theory goes that by increasing the amount of available credit you have, you’ll be driving down the percentage of it that shows up as being used which will improve your credit utilization rate.

Lenders aren’t stupid and while that trick might have the desired effect on your credit utilization rate, it will cause problems in other areas of your credit score, such as creating too many hard inquiries on your credit report which makes it appear as though you want to borrow from here, there and everywhere. Hard inquiries remain on your credit score for two years, so if a lender can see that multiple creditors have looked into your finances, they’ll question why you have been so desperate to get credit from so many different sources.

Then there will be the temptation to use those extra credit cards which could end up having an extremely detrimental effect on your rating. If you don’t have multiple credit accounts, then you can’t be tempted to use multiple credit accounts.

Always dispute inaccuracies on your credit reports

Given how important your credit score is when it comes to the potential for future borrowing, it’s important that ensure that it is accurate. A website such as Annual Credit Report is government approved and allows you to see your credit score from all three of the credit reporting bureaus – TransUnion, Equifax, and Experian.

If there is any incorrect information within your credit reports, then you should report and dispute the data immediately. Verify that all the accounts listed are correct and belong to you. There is a chance there may have been a mix up somewhere or even that somebody has borrowed money in your name and racked up severe debt that could be dragging your credit score down – and that, up until now, you weren’t even aware of.

You can get any inaccuracies corrected by reporting them to the credit reporting agency and the institution which has provided the false information, be that your bank or a money lender. They are required to investigate and ultimately remove the problem area from your credit score if indeed it is nothing to do with you.

Because of how vital your credit rating is, you should run a free credit report check at least once a year to ensure that your score is accurate.