Credit decisions in the United States are based on information from the three major credit bureaus–Experian, Equifax and TransUnion. These companies keep a history of your credit payments and compile a credit report. Under federal law, you are entitled to one free annual credit report from each of the three agencies. This report is available online at or by phone at (877)322-8228. You may order all three at once, or order them separately throughout the year.

What is a FICO Score?

In addition to credit reports, creditors may use a rating called a FICO score. The acronym stands for Fair Isaac Company, a software developer that creates analytics based on past behavior. Using your credit history from credit bureaus, a FICO score can be developed to predict the likelihood of a consumer making on-time payments or being referred to a collection agency. These predictions are standardized into scores with a high score meaning a good credit risk and low score meaning a bad credit risk.

Creditors often use one or both metrics to determine whether you can get a mortgage for a house, an auto loan or a credit card. Increasingly, credit information is also used in the employment process and in apartment rentals. With this in mind, it is important to make sure the information in these reports is correct and that outdated or incorrect information is removed.

Pay On Time

The simplest way to improve your credit history is to make payments on time. Making minimum payments on time has a more positive effect than making larger irregular payments. Set up automatic payments through your bank or through the creditor company.

Pay Off High Debt Balances

Compare the amount owed on a credit card to your credit limit. To maintain a good credit rating, you should use 20% or less of your available credit. For example, for a credit limit of $20,000 your balance should not exceed $4,000 for any extended period.

Use your free annual credit report to make a list of all your accounts. Then determine the balance owed and the interest rate for each account. Rank your accounts from the highest interest to the lowest and start paying off the high interest balances first. Maintain a minimum payment on lower interest accounts until all accounts are paid off.

The Federal Reserve System has a useful article “5 Tips for Improving Your Credit Score” available at Websites like www.myFICO .com provide additional tips on how to improve your credit score. Many banks and credit unions offer help in managing and improving your credit.