7 Ways to Boost Your Credit Score

The good news: Even with a blight on your report, it's possible to give your credit score a boost over time.

The first step is to understand how your FICO score works. FICO stands for Fair Isaac Corp., the Minneapolis-based company that creates the risk calculations used to calculate credit scores. Lenders use FICO scores to predict what kind of borrower you'll be. Scores range from 300 to 850; the higher, the better. A high score means lenders generally consider you a safe bet: that you manage credit responsibly and aren't likely to default on your payments. For that, you'll be rewarded handsomely. For more on credit scores, click here.

When it comes to improving your score, you shouldn't expect dramatic changes overnight. "It's a long haul, like improving your cholesterol or losing weight," says Craig Watts, public affairs manager for Fair Isaac. "You need to make slow changes in habit. It'll take months to improve a poor FICO score."

Ready to get started? Here are seven ways to maximize your score.

1. Talk to your lender
Ask your lender what score you'd need to snag the best interest rate, says Watts. More people are becoming aware of how their credit score can help or hurt them, so many lenders are responding by making more information available.

The average credit score nationwide is 723, according to MyFico.com. Generally, if your score is in the mid-700s or higher, you'll be offered a lender's best rates. If your score is somewhere between the low 600s and low 700s, be careful. That's a "gray area where lenders parse out the good and the bad [rates]," says Watts. So be sure to shop around to see where lenders place you. If your score is less than 600, you'll pay dearly for credit (see table).

2. Get the right score
While considering a lender, find out which brand of credit score it uses. In addition to Fair Isaac Corp., each of the three credit reporting bureaus — Equifax, Experian and TransUnion — sells credit scores. Equifax uses FICO scores, while Experian and TransUnion have their own formulas.

Your score could vary by as much as 20 to 30 points from one company to another, so it's important to know which measure your lender is using. Each bureau may also have a slightly different version of your credit report, which could also affect your score.