It’s not hard to bump up your credit score. It’s not hard to lower it, either.

Whether you have a good or a poor credit score, the fact you have one at all is the fault of the Minnesota-based Fair Isaac Corporation (FICO), which, in 1958, created the statistical basis for determining creditworthiness. The practice of using a set number by which prospective borrowers were judged didn’t become widespread until the 1980s. Because the score is derived from algorithms, it is considered impartial.

Before credit scores became the determiner of creditworthiness, underwriters had some discretion when granting or denying credit. In many cases, this practice led to discrimination against minorities and women, but it also allowed wiggle room if the underwriter believed the borrower would pay back the loan despite past debt problems.

In the United States credit scores usually come from one of three credit bureaus-Experian, Trans-Union and Equifax. The most important elements determining a credit score are payment history, the ratio of debt to available credit and the length of good (or bad) credit history. Delinquencies, bankruptcies, judgments, liens and late payments on credit cards, mortgages and even utility bills can lower credit scores.

A FICO credit score can range between 300 and 850, the higher the number the better. Anything over 700 is considered excellent credit and lenders will negotiate lower interest rates for people with these numbers. Anyone with a score much below 600 is considered by lenders to be a serious credit risk.

If you’re judged to be a credit risk, you can expect higher insurance rates, elevated costs or denial of credit and you can be refused a lease on an apartment or a cell phone account. The scores are even used in pre-employment screening. A low score can brand you as an unreliable employee, which makes it harder to get a job.

While each credit situation is unique, there is some general advice that works to raise low scores or maintain high scores. Kris Rausch, a mortgage loan officer with the South Minneapolis Coldwell Banker Burnet office said
that there are a three simple rules people can follow:

1) Keep a low utilization ratio. Keep your utilization ratio-the amount of your total debt divided by your total available credit-as low as possible. “Keep your balance 30 percent or below your credit limit,” Rausch said. “While you want to avoid debt, it doesn’t hurt to use your credit cards.” Credit bureaus are interested only in how you use credit. If you don’t use credit, you can’t improve your scores. Be careful, however, to use the cards purposefully, spending down the balance instead of adding more debt.

2) Don’t have too many outstanding credit cards or loans.
“When a retail store offers you a percentage off your purchase to sign up for their credit card, don’t do it,” Rausch said. People trying to raise their credit score should generally have no more than four credit accounts. But, if you already have a credit card account with a low or zero balance, keep it open, even if you don’t use it. The longer the credit history on any account, the better it is for your score because it raises your total available credit compared to your overall debt.
The exception for opening store accounts are those people-like young adults with no credit history-who are trying to build a good credit score, said Rausch. Then, opening a store card and using it for low-priced items or essentials like groceries, then paying off everything at the end of the month can be a smart move. It’s one way to establish a base credit history.

3) Pay all your bills on time.

In fact, pay all your bills ahead of time. Don’t count on the short grace period allowed by most lenders to send in your payment. Pay early and as much as possible and you’ll eliminate your debt faster while raising your credit score.
Bob Krejci, a mortgage banker with Prime Mortgage recommends that every person should take advantage of the federal law that allows anyone to check their credit report for free, once a year. Sometimes fixing incorrect or outdated information with credit bureaus is all that’s needed to significantly improve a credit score. If a mistake is found, call the bureau and do what you need to do to get the mistake fixed.

The only government authorized source to get this free credit report is from the U.S. Federal Trade Comm-ission and is available online at AnnualCreditReport.com or by calling 877-322-8228. (Other places offering free credit reports, including those with catchy jingles, are actually companies who offer the reports as a lure to sell a product or a service.)

People who have severe credit problems can find help by talking to a credit counselor. If a credit repair organization asks for a large up-front fee and promises miracles without sacrifice, they may be there to take you for a ride. Some of these companies do nothing except take your money, others engage in unethical and even fraudulent practices. Do your research to find a legitimate credit counseling organization.

Credit counselors like David McGee, the executive director of Build Wealth Minnesota, a nonprofit credit counseling organization affiliated with the Urban League, helps families develop a new attitude toward debt and borrowing through a series of low-cost classes and private counseling sessions. The program can run for as little as six months or up to two years depending on the severity of a client’s credit problems. McGee teaches families in financial trouble to think of credit in a different way than what got them into trouble in the first place.

“We’re dealing with relationships when you’re talking about credit,” said McGee. “Say that you want a car to go to and from work. It costs $5,000, but you don’t have $5,000. The bank wants to make money and they give you the $5,000 and charge you to use the money to buy the car. There are contracts that are read and signed. You have to pay back the money and you should know what it’s going to cost you before you agree.”

“I don’t encourage anyone to get into debt, but you can treat credit strategically,” said McGee. An installment loan (like a car loan or a mortgage as opposed to a revolving credit card) will boost your score if you always pay everything on time.”
McGee recommends that anyone who is having trouble making ends meet, especially due to a job loss or other serious problems, should call their creditors and explain the situation as soon as possible.

“People get scared, but the lender has at least five remedies. Be open and honest about your situation,” he said. “Know how much you owe and how much you can pay and ask if the creditor has a solution. Don’t get into an argument with them. This doesn’t have to be an adversarial relationship. The best outcome is where everyone can be in a good position at the end of the day.”

Stephanie Fox is a real estate agent with Coldwell Banker Burnet. She can answer questions about credit scores, mortgages and the current real estate market at 612-721-7495.