Raise your credit score — and there are no shortcuts

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There are three simple steps you can take to improve your credit score.

They're well worth knowing and following because your credit score is one of the most important numbers you'll carry through life, like it or not.

No one asks if you want one. No one tells you when you get one. No one tells you what it is unless you ask -- and pay to find out.

Yet that score will play a big role in whether your application for a credit card, auto loan or mortgage is approved and what your monthly payments will be. The higher your score, the lower your interest rate and payments.

Credit scores are used for lots of other things, too, like setting car insurance premiums. The higher your score, the lower your premiums.

So we're not talking peanuts here. The difference between a high and low score can save you hundreds of dollars a month.

Your credit score is based on what banks, stores, utility companies and other creditors have told the three major credit rating agencies about how much you owe and how diligently you've paid it back.

There are no shortcuts to improving your score.

Don't listen to anyone who wants to "fix" your bad credit score for a fee. Some guy with an 800-line or an office between the check cashing store and carry-out pizza joint at your local strip mall can't help. Suze Orman, the well-known personal finance author is right when she says, "Credit repair is the biggest rip-off out there."

The latest Internet scheme is paying to become an "authorized user" on someone else's credit card. While you can't actually use the card, its impeccable payment record is added to your report, boosting your credit score by 30 to 45 points.

"Piggybacking" is expensive. Identity theft is a risk. Banks consider it fraud. And Fair Isaac Co., creator of the FICO credit score, will no longer count authorized users when its formula is revised this fall.

To legitimately boost your credit score, here's what you've got to do:

Here's why.

Your credit score is computed using a formula created by Bill Fair and Earl Isaac. Nearly 50 years ago they figured out that if they could collect enough information about a person's credit history, they could calculate how likely that person would be to miss a payment or default on a loan.

That risk factor is represented by your credit score, or your FICO score as it's commonly called in the credit biz. The higher the score, the lower the risk. While it is theoretically possible to earn a "perfect" 850, a score in the 700s is considered good or excellent. If your FICO stands in the low-600s, however, you have trouble.

Your score is calculated using 22 different variables from your credit history.

About 35% of your score is based on how promptly you pay your bills. The second most-important element is the amount that you owe. That accounts for 30%. The number of years you have used credit counts for 15%. The types of credit you use -- credit cards, store charge cards, installment loans, mortgages, and so on -- is worth 10%. That looks at how many accounts you have opened recently and how many times companies have accessed your credit history.

Take special notice of one surprising thing that is not used to calculate your FICO score -- how much money you make. It doesn't matter whether you earn $10,000 or $10 million a year, income is not a factor.

There is a FICO score on everyone who has a credit file with any of the three national credit agencies, which accounts for 75% percent of U.S. consumers over the age 17 -- about 165 million people.

You're almost certainly one of them if you've ever had a bankcard, store charge card, auto loan, or any other kind of debt.

A new federal rule requires the three big credit-reporting agencies -- Experian, TransUnion and Equifax -- to provide a free copy of your credit history every year. Just go to www.AnnualCreditReport.com.

If there are items on your credit report that are wrong or that you think are unfairly portrayed, you can file a formal appeal with the credit-reporting agency. Each agency has an appeals process that you can find by contacting them at the Web sites or phone numbers listed below.

Your credit report does not include your FICO score. For that you have to either call one of the agencies or go to one of their Web sites, and pay $10 or $15.

Here's how to contact the credit reporting agencies: