Employers, lenders, and insurers all use your credit report to evaluate your level of responsibility before they decide whether to hire you or take you on as a new client.

These entities use credit scores to assess your history of spending and loans to determine the financial risk you may present. A credit score is a number calculated based on your past credit history, which takes into account your

• payment history
  
• amounts owed
  
• length of credit history
  
• new credit
  
• types of credit used
  

Lenders may use your credit score because it is quicker to review and less subjective than a credit report. You can obtain your credit report once annually, at no cost. The credit score is not free, but can be purchased relatively inexpensively from one of the three major credit bureaus: Experian, Equifax or TransUnion.

A poor credit report can either hinder you from securing a loan or earn you a costly rate. Improving your credit score can make obtaining future loans and credit significantly easier. Scores range from 300 to 850. If your number is closer to the lower end of the scale, there are many simple ways to improve it:

• Keep credit card balances low and pay bills on time. Over time this will raise your credit score. Someone with no credit cards is likely to receive higher monthly premiums than someone who has prudently managed their credit.
  
• Opening new accounts and paying them off will raise your score. However, don’t open unnecessary accounts to provide a short-term credit fix. Manage your existing credit accounts responsibly.
• Pay off debt rather than transferring it to other lines of credit. This is one of the most effective ways to improve your score. Pushing your debt around is likely to lower your score. The same amount of debt in fewer accounts earns a higher credit score.
• Don’t close existing accounts hoping they will vanish from your report. Your account history stays on the record for seven years—closing them will not eliminate them.
  

Lastly, obtain an annual copy of your credit report to monitor your improvements.

You don’t have to come up with a plan all by yourself—speak with your financial advisor to figure out a workable strategy for you. You don’t have to be racked with debt to have a less-than-desirable credit score. The sooner you act the more of your score you are likely to recover.