Your 5-minute guide to credit scores

Want to improve your score and keep it high? Think of credit as a privilege to be used sparingly.

• Don't apply for lots of credit cards. A credit inquiry can deduct five points from your credit score. However, multiple checks made when you're shopping for a mortgage will count as only one.
• Asking for your personal report won't hurt your score. Neither will requests made by credit card companies that offer preapproved cards, or requests by prospective employers.
• Avoid applying for credit cards from companies that don't set a spending limit or won't report your limit to the credit bureaus. (See "Weird stuff that hurts your credit.")
• Don't cancel multiple credit cards. That can suddenly lower your available credit and can hurt your credit score. Keep old accounts open to ensure a long credit history.
• Limit the percentage of available credit you use to no more than 30%, even if you pay off your balance each month. Your credit report will show the amount you owed, even if you subsequently paid in full, and excessive spending will ding your score.
• If you don't have a credit history, start one by obtaining a secured credit card and managing it responsibly. (See "9 ways to build credit from scratch.")

It pays to pay on time

The No. 1 way to raise your credit score? Pay all of your obligations on time. Your payment history constitutes 35% of your credit score.

• That includes library fines and parking tickets. Municipalities have become increasingly aggressive about turning over delinquent accounts to collection agencies, which will drag down your score. (See "Now bounced checks can trash your credit.")
• One late payment reported to a credit bureau can drop your score by 100 points, particularly if you had a high score.
• Late payments can remain on your credit report for seven years. Bankruptcies appear for 10 years.
• Consulting a credit counseling service to manage excessive debt will not damage your credit score. (See "The consumer's guide to credit counseling.")

If you find an error in your credit report, ask the creditor to correct it, then notify the credit bureau by sending a certified letter and copies of documents that support your claim.

• If the error isn't fixed, the bureau must identify the person who investigated your claim, and you can request a second report.
• If the error is corrected, the bureau must send you a copy of your new report and, at your request, a copy to everyone who obtained your credit report within the previous six months.
• If it's not corrected, you can include a statement in your credit report.
• Faced with a faulty credit report when you're about to obtain a mortgage? Mortgage companies can engage a rapid rescoring service to correct errors within days.
• Paying a service to monitor your credit is not worth the fee, unless you've been the victim of identity theft and have reason to believe you're still at risk.

If you've got a hint we haven't included or find a factual error, let us know by sending an e-mail to Five.minute@hotmail.com.

Updated March 30, 2009

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