If your credit score has taken a hit, you already know how much it can impact your finances and your opportunities. It can make it more difficult to find an apartment or secure a mortgage. It can make purchasing a car more expensive and even require you to pay extra security deposits for your utilities. Improving your score will be worth your time and effort, but it’s going to take plenty of both to move your number in the right direction.

Get Your Credit Reports

The first step to improving your credit score is to get copies of your credit report from each of the three main credit reporting bureaus: Equifax, Experian and TransUnion. The Fair Credit Reporting Act entitles you to one free copy from each per year. You can choose to have all three pulled at once, or you can monitor your credit over the course of the year by ordering one from each bureau every four months.

Most credit scales, including FICO, break down into the following segments:

Excellent: 750+
Good: 700-749
Fair: 650-699
Poor: 600-649
Bad: 599 and below

Check Your Report for Errors

It’s important to carefully check each report for any errors. An error can be as simple as a misspelling of your full name or an error with your Social Security number or a past address. Errors that might be more difficult to spot will have to due with inaccurate reporting of accounts, particularly payment dates and amounts. If you find any late or missed payments reported that you can prove you made on time, make a note of these. Also take note of any accounts or applications that you don’t recognize.

For each error you’ve noted in your review, you’ll need to file a separate dispute with each of the three main credit bureaus. For example, if you found two errors, you’d need to file a total of six disputes, two for each of the three bureaus. Once your disputes have been filed, the bureaus have 30 days to respond. You can find additional information on filing disputes at the Federal Trade Commission’s website.

The Most Important Credit Score Factors

According to Bruce McClary, Vice President of Communications for the National Foundation for Credit Counseling, the two most important factors in determining your credit score are your payment history (35%) and your credit utilization ratio (30%). It makes sense then that the most effective way to improve your credit score would be to start with these two factors.

Payment History

When a lender wants an indication of what your future behavior will be, they look to your past behavior for clues. Specifically, they want to know if you paid your bills on time and in full. This includes the full range of accounts on your credit report, from your mortgage to your light bill, and if any of your bills was settled for less than the original amount or was sent to collections.

Although you can’t go back in time and change past behavior, you can take proactive measures if you know you’re going to be late or miss a payment. Contact your creditor as soon as possible and explain your situation. Although the creditor may still report the late/missed payment, it doesn’t hurt to try. The next step would be to bring your account current as quickly as possible because the longer you go without a payment, the bigger the hit will be to your credit score.

You might be more motivated to make the call to your creditor when you keep it mind that late and missed payments stay on your credit report for seven years. The impact does decline over time and can be offset with positive marks. Your best bet is to keep your future payments on track by setting up automatic payments and using calendar reminders.

Credit Utilization Ratios

Your credit utilization ratio concerns how much you’ve charged on your credit cards compared to your available credit limit. McClary defines credit utilization ratios as “the combined balance of how much you owe on your credit cards compared to the total amount of credit you still have available. Your credit score takes into consideration both the individual credit utilization of each card and your overall utilization ratio.“

While many experts suggest keeping your ratio at or below 30%, McClary advises taking a more conservative approach and keeping the ratio at or below 25%. He believes your credit score could suffer if the percentage creeps above that point. People with the highest credit scores tend to have credit utilization ratios at or below 10%.

Improve Your Ratio by Paying Off Maxed-Out Cards

According the John Ulzheimer, formerly of FICO and Equifax, the most significant way to improve your credit utilization ratio is to pay off your maxed-out credit cards. He says doing so could improve your credit score by as much as 100 points. It seems like a daunting task, but Ulzheimer suggests starting with your credit card that has the highest utilization rate and working your way from there.

Improve Your Credit Ratio by Raising Your Credit Limit

Improving your credit utilization ratio could be as simple as calling your credit card provider and asking for an increase to your credit limit. If your balance stays the same and your limit increases, your ratio will automatically improve. However, be sure to ask for the increase without a “hard” credit inquiry. A hard inquiry will have a small negative impact on your credit score for the next two years.

Improve Your Ratio With Multiple Payments

Unfortunately, your credit utilization ratio isn’t calculated once a month. If your ratio goes past the 30% mark at any time during the billing cycle, even if you pay off the entire balance when your bill arrives, your credit score could suffer. To avoid this situation, make multiple payments on your credit cards throughout the billing cycle. Better yet, set up automatic payments or use calendar reminders to stay on top of your balance.

What’s the Remaining 35%?

Since the bulk of your credit score (65%) is determined by your payment history and your credit utilization ratio, that leaves us with 35%. McClary attributes the remaining percentage to credit history length (15%), new credit inquiries (10%), and your credit mix (10%).

Credit History Length

The age of your credit history also helps creditors determine your creditworthiness. This means that the credit card you got in college but haven’t used in years may actually be helping your credit score. Not only does it help establish your credit history, it also helps your credit utilization ratio. For these reasons, don’t be tempted to cancel credit cards you’ve had for years but no longer use. Follow the same reasoning when it comes to having paid accounts removed from your credit report, especially if they show positive payment histories. It’s “like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

If you have a trusted friend or relative with a long and positive credit history, you could ask to become an authorized user on his or her credit card. This involves risks on both sides, so don’t be surprised if the answer is “no.” He or she would be putting their own credit rating at stake, as would you, because your credit ratings would be tied to each other’s payment practices, both positive and negative.

New Credit Inquiries

Although a new credit card may help with your credit utilization ratio, applying for unnecessary lines of credit shouldn’t be taken lightly because a hard credit inquiry will cause a small negative impact on your credit report that lasts for two years, even if you aren’t approved for the card.

When you’re buying items that require financing, like a home or vehicle, try to limit the amount of time you spend rate shopping. Scoring formulas do take rate shopping into account, meaning that you may be submitting multiple applications but only taking out one loan. FICO typically ignores such inquires made 30 days before scoring. Inquiries older than 30 days will be counted as one if they were made within a typical shopping period (between 14 and 45 days, depending on the form of scoring software used).

Credit Mix

Your credit mix is the combination of revolving credit and installment loans you have. A credit card is an example of revolving credit, and an auto loan is an example of an installment loan. Even though lenders like to see a variety of accounts, it wouldn’t be advisable to take out a loan just to improve your credit mix.

Be Patient and Have a Plan

Improving your credit score isn’t going to happen overnight. It’s going to take patience, planning and plenty of hard work, especially if your score is closer to the bottom. Focus on improving your payment timeliness and credit ratio, and you’ll see changes that will impact your opportunities and your bottom line.