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Here's how your FICO score is determined and how you can raise it

As an even more drastic step, you can also cut up a credit card you won't be using, and still leave the account open. Just recognize, however, that taking the scissors to your Visa or MasterCard says more about you than it does about that piece of plastic. Credit cards aren't inherently bad or evil. It's our own inability to manage credit wisely that gets us into trouble.

Mix of credit: 10 percent of your credit score
The credit-scoring world also rewards you for showing that you can responsibly juggle multiple forms of credit. Thus, your score will be higher if your credit files include various types of credit, such as a mortgage loan, an installment loan (like a student loan or auto loan) and credit cards. Again, as long as you pay all these obligations on time, you'll boost your credit rating in this category.

Inquiries or new credit: 10 percent of your credit score
A "hard" inquiry is triggered on your credit report whenever you seek credit or apply for a loan. Inquiries remain on your credit reports for two years. For the purpose of calculating your FICO scores, inquiries count against you for one year.

Various experts have estimated that a single inquiry can lower your credit score by anywhere from five points to 35 points. I once had an inquiry lower my credit score by 14 points.  So only apply for credit when you really need it. And skip those department store credit card offers; they just generate inquiries.

A "soft" inquiry, like checking your own credit report, does not hurt your credit score.  You can — and should — check your credit reports from each of the three main credit bureaus at least once a year. You can get your Equifax, Experian and TransUnion credit reports free of charge annually at AnnualCreditReport.com.

You should also know that factors such as your income, race, age, gender or marital status play no role whatsoever in computing your credit scores. In fact, federal law prohibits the use of race, age, nationality, religion, sex or marital status in credit scoring.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.

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