Seven Ways to Improve Your Credit

This holiday season, give yourself the gift of improved credit.  Use these seven simple steps to improve your credit and your score.  A better score gives you access to cheaper credit-a true luxury in this tight economy.

If you've had credit problems or carry heavy consumer debt, your FICO score is probably lower than you'd like.  That's not good news, considering how much banks and credit card companies are tightening lending requirements.

You can improve your credit score, however, by using these seven basic tips.

1. Pay off your consumer debt. Just like bad credit, consumer debt can cause your credit score to plummet.  If you have the cash, be diligent about paying off your consumer debt.  The more cash you have on hand, the better lending prospect you'll be.

2. Use retail cards. To help build up your credit score, sign up for a retail card or two.  Use the plastic sparingly, however.  The goal is simply to show credit bureaus that you can maintain a credit card without charging it to the limit.

3. Old accounts should never die. Credit scores are largely a reflection of your "reputation" among creditors.  If you have a long-standing account with a credit card company, don't close it.  Even if you find a better deal with another company, keep your older accounts open.  Use them on occasion, and the credit bureau will recognize the account as being active.

4. Check your credit score; keep it tidy. Monitor your FICO score on a regular basis.  By law, credit bureaus are required to provide you with a free credit report once a year.  Request it, and then check it carefully for errors.  Mistakes can cause your score to drop.  Vigilance will also help you deter identity theft.

5. Budget your money. Good credit scores start with proper money management.  Set up a regular budget and spend within your means.  You'll get yourself in trouble by over-extending yourself with credit, and a budget will tell you when you're pushing the limit.

6. Shop online. Reports of identity theft tend to scare people away from using their credit cards online, but many top online retailers have extremely secure systems.  Using a credit card online is a good way to keep track of your cash flow, and will help you monitor your spending habits.

7. Use professional services. Credit monitoring services are a good way to protect yourself from identity thieves.  For a relatively low monthly cost, you'll be alerted to any large, suspicious charges to one of your accounts.  You may also consult with a credit counseling service.  These trained specialists will help you get your consumer debt under control.

This holiday season, treat yourself to a gift that you'll enjoy for years.  Take a few simple steps toward improving your FICO score.  It's a great way to improve your lending prospects, a particularly valuable trait since gift-giving time is here at hand.