The moment you think about applying for a loan, first question that pops up in your mind may be, 'Is my credit score good enough?'. It is the one number that holds sway over the lender's judgment of your financial record. It is a prime indicator of your fiscal health and default parameter studied by banks and other financial institutions, when you apply for credit or a loan. What is a Good Credit Score? You need to have an idea about credit score ratings scale and how these scores are calculated. In USA, the most widely accepted credit score rating system is FICO. It is calculated using a statistical algorithm, developed by Fair Isaac company by credit bureaus for every individual in United States of America. As explained on the FICO website, the prime determinants of a credit score calculation in ascending order of importance are credit history length, total amount of money owed, current outstanding balance on various credit lines and your credit repayment history. Every defaulted loan payment and credit card bill hurts you in the form of a lowered credit rating and consequently decreases your creditworthiness in the eyes of your lenders. The FICO credit score range extends from 300 to 850. Any score above 660 is a good credit score. How to Improve It? So, what can you do to improve your credit score? You don't need to take any extreme measures but follow some simple guidelines that are as follows. Pay Your Bills On Time The simplest way of improving credit scores is to ensure that timely bill payments are made. Make sure that credit card bill clearance is given top priority as one defaulted payment can degrade your score. On the other hand, consistent credit card bill payments will raise credit score certainly. The fact that you are using your credit lines wisely, automatically boosts your credit score. Use Credit Cards Sparingly One of the things that can leave a blot on your credit report and lower credit score is unpaid credit card debt. Use your credit card as an emergency option and avoid buying on credit as much as possible. The revolving credit system employed in credit card interest rate calculation can mount your debts very fast. So, be careful while using credit cards and don't use them unless you absolutely must. If you must use them, then make sure you pay back a sizable portion of the monthly bill or clear it entirely. Clear Your Debts Another straightforward way is to clear your debts as top priority. This will improve your repayment history over time and you will eventually see an increase in your credit score. See to it that sufficient funds have been allocated for repayment of your mortgage loan installment and reminders are set for payment deadlines. Plan Your Yearly Budget & Expenses If you plan out your yearly budget and decide on spending limits, you won't make the credit score hurting errors that happen because of haphazard expenses. A sound financial plan and planned use of credit lines will reflect on your credit score rating, in a positive way. This is the prime suggestion of most financial advisors when they explain how to make your credit score better. Avoid Opening Multiple New Accounts Opening or closing multiple financial accounts for credit in a short time or making too many queries for credit lines is inadvisable. It may hurt your credit score. Open up a new credit account if you must, but availing too many credit lines in a short period of time may lower your credit score. So take all these points into consideration. Wise Usage of Multiple Credit Types Another factor which may substantially boost your credit score is the variety of credit types which you may have used. Your non-reliance on a single credit type and usage of multiple types of credit with timely repayments, improves your creditworthiness and helps increase your credit score. So, now that you know how to increase your chances of landing up with a good score, create an action plan. Chalk out your budget and expenses to achieve a set goal. The key to a good credit rating is to have a well planned strategy for managing your finance and expenses. Think before you make an impulsive purchase using a credit card and go for surplus expenses only after you have cleared your monthly bills and debt payments. When you borrow more than you can return in time, credit score will take a hit.