How to determine your credit rating and steps to get a good credit score.

One of the keys to improving a credit score is to know what makes up your rating. After you know that, it will enable you to take steps to improve your score. What is a credit score? A credit score is a summary of your credit history going back several years at minimum. Credit scores range from 300 to 850, with 300 being the worst and 850 the highest. A score is really a snapshot that gives banks and lenders an idea of whether or not you're a good credit risk, whether you should receive a loan, and today, it can even impact things like your car insurance premiums, and even whether you get that job you interviewed for.

There are five categories that determine a credit score, and they are:

• Your payment history (35%)
• Your level of debt (30%)
• Length of credit history (15%)
• Number and diversity of loans and credit accounts (10%)
• How many times your tried to get new credit (10%)

The key to getting the best credit score is to balance all five of these categories. The Foundation for Credit Counseling has this advice to get the highest credit ratings.

-The most important step. Pay your bills on time. If you pay late, that is the number one issue that leads to debt collectors, judgments against you, repossessions, lower credit scores, and much more, all of which is negative.

-Stay up to date on your credit scores and reports. A free credit report is available at annualcreditreport.com. Be sure to check it for omissions or errors. If you find any mistakes or incorrect data, report it immediately.

-Keep your outstanding debt low. Use just 10% of your credit limit is preferable and will lead to the best scores. If that is not possible, it would never be greater than 50%. There are different steps to take to reach these targets. You can either pay down debt, or increase your credit limits. Either way will lead to a lower debt percentage. Be mindful as well if your credit limits have been cut by the banks or credit card issuers, was that can make your account look maxed out and increase your percentage of unpaid debt.

-Sign up for new credit wisely, and be prudent. You should not take the bait for every card offer you get in the mail, no matter how tempting, or do not sign up for the credit card that will give you a at the department store. The more attempts you make to get credit, and the more credit requests completed, the lower your credit score will be.

-Do not needlessly close accounts. Part of your credit rating is determined by how long you've used a credit card and have you been able to manage your credit responsibly. Closing an account shortens that credit history and lowers your score.

-Use different types of credit. For example, having a mortgage, car loan, credit cards, and a personal loan show you can manage several types of credit at once and will lead to higher scores.