5 Proven Ways to Boost Your Credit Score

If you find something wrong, contact the creditor and the credit bureaus and ask them to update or correct any misinformation. Your credit report will tell you how to do that. The Consumer Financial Protection Bureau has sample letters for correcting a credit report. You can also correct your report online, which is faster than relying on the mail.

2. Set up automatic bill payment.

If you have the money but keep forgetting to pay on time, put your bills on autopilot. Most companies are happy to help you set up automatic payments online. Your bills will be paid before the due date, and you won't have to go out and buy stamps.

Credit reporting companies typically won't ding you if you're a day late with a payment, says Rod Griffin, senior director of consumer education at Experian. “Typically, a late payment shows up on your credit report if you're late by an entire billing cycle,” Griffin says. Your lender, however, may tack on a late payment fee or increase your interest rate if you're even a day late.

Your credit score won't automatically improve once you set up autopay, and if it's low because of something serious such as defaulting on a loan, it could take years to reap the benefits. If the main problem is forgetting the car payment, however, automatic bill payment can help your credit score start rising again. Your on-time payment record accounts for 35 percent of a FICO score.

3. Reduce the amount you owe.

Lenders want you to borrow — but not too much. Typically, lenders start to raise their eyebrows when you use more than 30 percent of your available credit on all your credit cards. This is measured by what's called a credit utilization rate — how much credit you're using divided by the total amount available to you — and a low one means you're probably doing a good job of budgeting. Credit utilization is 30 percent of your FICO score.

And having too little activity can be a problem as well, Griffin says, because if you need a loan, the lender will want to see that you have used credit wisely in the past. Even if you don't have a credit card, you can ask that utility bills or other regular bill payments be added to your credit report.

For fixed-rate loans, such as home loans or car loans, lenders look at your debt-to-income ratio, which reflects how much of your annual income goes to paying debt. It's the amount of your monthly debt payments divided by your monthly income. Your debt-to-income ratio doesn't affect your credit score, but if it's too high, you might not get many credit-card offers, and it might be harder for you to get a car loan or mortgage.

If you have a card that's maxed out, or close to maxing out, then pay it down aggressively. You might even consider diverting some money from savings to pay down your credit card. All things being equal, paying down a credit card that charges 18 percent interest is about the same as earning 18 percent on an investment.

4. Don't rush to close old accounts.

The age of your oldest account, the age of your newest account and the average age of all your accounts make up 15 percent of your credit rating. As long as you're not paying annual fees on an open account, it can be worthwhile to let it collect dust. The longer you've had credit, the better your score.

5. Don't ask for credit too often.

Getting a new card from time to time shouldn't ding your credit, nor should taking out a car loan or mortgage. People who default on loans tend to rack up a great deal of debt before they default, so lenders keep an eye on how many times you ask. New inquiries are 10 percent of your FICO score. (The final 10 percent is based on credit mix; lenders like to see a diversity of debt types all in good standing.)

Lenders will pull your credit report when they are considering making a loan to you, and this type of inquiry is called a “hard inquiry.” Hard inquiries stay on your credit report for about two years. Lenders look at a cluster of hard inquiries as a sign of financial trouble.

"Soft inquiries” are when someone looks at your credit as a background check — an employer, for example, might pull your credit report if you've applied for a job. And sometimes lenders will pull your report to see if you're a good candidate for a new credit card. Soft inquiries don't affect your credit score.

John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and USA Today and has written books on investing and the 2008 financial crisis. Waggoner's USA Today investing column ran in dozens of newspapers for 25 years.