You're looking to take out a new home or auto loan, but afraid that a history of bad credit and a bad credit score will hold you hostage to high interest rates.  Your credit score is crucially important, as it more or less dictates the interest you'll pay for any money you borrow. 

Credit scores range from 300 to a perfect 850, and are based on information the credit bureaus receive about you from credit cards and any others you've ‘borrowed' from in the past.  Credit scores take into account all debt you've incurred and all debt you've paid off.  Your credit score may consider your payment history, the length of your credit history (in years), the kinds of credit you have and amounts owed.  The higher your credit score is, the better—and the difference between a credit score of 698 and a score of 700 could mean thousands of dollars. 

Take control of your credit, by tackling outstanding debts and financial issues one step at a time.

Steps to Take to Boost Your Credit Score:

Get the facts on your financial situation.  Start by requesting your credit report to find out what your actual credit score is.  (You can request a free credit report once a year at: www.annualcreditreport.com, or purchase a credit report whenever you need through one of the three national credit bureaus: Experian, Transunion, or Equifax). Generally speaking, if your credit score is above 720 you're in great shape as far as banks and mortgage brokers are concerned.  A credit score of 620 tends to be the drawing line for most creditors—below that you'll face higher than usual interest rates, and if your credit score is too much below you may be refused a loan or mortgage because your credit score isn't high enough. Negative information regarding your debt should be deleted from your credit report after seven years. 

Pay Up!  Nearly all of us rely heavily on credit cards these days, but the key to good credit is paying your credit card bills on time, keeping credit card account balances low, and taking out new credit only when you need it.  (High credit card balances do make a difference; maxing out your credit cards can lower your average credit score by as much as 70 points).  If you have outstanding credit card account balances and can start to chip away at those even a little bit, this is a surefire way to raise your credit rating.  Most credit card companies report to the credit bureaus every 30 days, so if you're diligent about paying down those credit card balances, you can see an upturn in your credit score in as little as two or three months.  Continue to check your credit report for any changes in your credit score.

Shop around.  When it comes time to look for a mortgage or loan, do your best to research the going interest rates and find out who offers the best interest rate for a specific credit score.  Current interest rates for mortgages, car loans, and other consumer credit are published in daily newspapers or can be found online at such sites as www.bankrate.com. If you have a good credit score but are not offered a good interest rate, ask questions, negotiate, or keep looking elsewhere for a better interest rate.

If you decide to cut up credit cards, leave the oldest one open—since the length of your credit history is another factor in your credit score.

Regardless of your starting credit score, there are nearly always steps you can take to improve your credit score and financial situation.  Even if you've paid your bills late in the past, you can improve your credit score by paying every bill on time from now on.