Perhaps the most valuable suggestion for improving your credit file, and consequently your credit risk score, is to act responsibly. Know your financial limitations. Understand how your monthly income relates to your monthly bills and debts. Don't spend out of your bounds. Once it's in your record, the only true way to eliminate negative credit information from your file is the passage of time. Information in your credit history will only be changed if it is inaccurate or if the seven (or 10) year reporting period has elapsed. In some cases, adverse information may be reported without reference to these periods.

If you have a history of bad credit, there are a number of things you can do to start rebuilding a positive credit file:

• First, know what's on your credit report. If you have been denied credit, you have the right to request a free credit report. Or, for a reasonable fee you can conveniently order your consolidated report from Confidential Credit, which includes information from all three national bureaus. Take the time to understand not only what's on your report, but also why you have been denied credit.
• Check for mistakes on your credit report. Be sure to examine your files from all three bureaus, as the information may not be the same on each one. If you find errors, take steps to dispute the information in order to remove it from your file.
• If you are having difficulty paying your bills, develop a plan now. Make a list of everyone you owe and how much you owe. Contact your creditors and discuss payment options. Begin now to catch up with late payments. These efforts will show you are earnest in meeting your obligations.
• Look for ways you can consolidate bills. You might be able to do a balance transfer to another credit card with a lower interest rate and also eliminate three or four other credit card accounts you currently have.
• Identify ways you can decrease your spending and increase your income. Ask a friend or family member to help you come up with a realistic budget that will help you catch up with late payments.
• Finally, don't use credit again until you are on more solid footing. You may want to cancel, or just hide, your credit cards until you are in a financial position to use them responsibly again.
• When you use credit cards, try to keep your balance due at 50% or less of the available credit.
• Try to avoid large purchases with little or no money down. These purchases can affect your credit until you show your ability to make the payments.
• If you are having trouble fulfilling your obligations, choose wisely whom to pay. A late payment on a home mortgage will affect your credit more than a late credit card payment.
• If you are just starting out on your own, perhaps after a divorce or just out of college, you'll want to begin establishing a positive credit file. This will play an important role in determining your future creditworthiness and in ensuring that you have a good credit score when it comes to evaluating your file for a mortgage or other type of loan. If you have little or no prior credit history, consider these steps:
  • * Limit the number of accounts you have. Resist the temptation to sign up for every credit card you can. Find a revolving credit card that has a reasonable credit limit ($300 maximum) and stay within your budget.
  • * Pay your bills on time. Every month, your creditors release information to the credit bureaus. Make sure your creditors are reporting only positive information about your bill-paying history.
  • * Ask a family member to help you get credit. If you have little or no credit history, you may need the assistance of someone with an established and positive credit record to cosign a loan for you. However, if you do this, be sure you are responsible in making all your loan payments on time.
  • Remember, your credit history influences your ability to rent or buy a house, get a job, buy insurance and purchase items with a credit card. Many lenders and creditors consider it a direct reflection of your character. Start now to ensure that you have — and maintain — a good credit history.

Wondering what other questions you should be asking or what some of these terms mean?
Check out our helpful FAQs section and our glossary of loan terms.