Improve your credit score

Erica Rodriguez has a problem. She can't get a credit card, can't buy a house, and can't even rent a car.

Why not? Because she has a credit score so low, it doesn't even register.

"It's hard for everything, not only if you want to buy a car or a house, you cant rent an apartment, even if you want to get a job," said Rodriguiz.

Erica is a recent immigrant, moving to the U.S. from Costa Rica two years ago. She's trying to build a life, here in Cincinnati, but she's stymied at every turn.

"When I went to the bank, they told me I have no credit score, no credit history, so they couldn't give me a regular credit card."

Forget Refinacing, or a Decent Car Loan

Most of us are not in Erica's situation. But many of us have seen our credit score battered by the recession, due to late payments or missed bills.

Credit scores range from 300 to 850. If yours is below 600, forget about refinancing or even a decent car loan these days. So what can you do?

No Credit or Battered Score?  Start with "Secured Card"

Personal finance expert Crystal Faulkner says, "If you don't have a credit card, like Erica, start by getting what's called a secured credit card. The card issuer takes the deposit, and keeps the deposit on hand, until you can work your way up."

Don't Pay Off Cards Every Month

Faulkner says Erica should then stretch out the payments.  Resist the urge to pay if off every month, even though that may seem like the logical thing.

"The fact that you pay it off the next day has no impact on your credit score," explained Faulkner.  Pass along $50 or $100 to the next month, then pay some more off.  This is "revolving" credit, and scorers love to see it.

Apply for Store Card or Loan

Then, once you've been using and paying off a credit card, apply for a small bank loan , which also improves that score.  It could be a $5,000 loan for a used car, or a small home improvement loan. 

Pay it down every month, and you build your score up.

Then, get a second, even a third, credit card.  Store card s tend to be easier to get than unsecured Visa or Mastercards.

It sounds wrong, but Crystal says the more "open credit" or available, unused credit Erica has, the higher her score.

Just don't max them out.

"It's much better to have more cards with a smaller amount on them, as opposed to one card with a large amount of credit," said Crystal.

Don't Cut Up Cards!

Finally, if you have 3 or 4 credit cards in your wallet, resist the urge to cut up cards you don't use. That actually lowers your score, because you will have less available credit.

Rather, Crystal says put a small payment on them once or twice a year, then pay the bill.  It keeps them active, and builds your credit.

Check your Credit Report

You should also check your credit report every year (it is free), to make sure there are no errors or evidence of someone openingt an account in your name.  You can also check your score while you are at it (that will cost about $10).

For a free credit report, go to annualcreditreport.com   (click underlined words).

Do not go to any of the sites that have the word "free" in their name.  Most will charge your credit card at least $12 a month, forever.  Also, avoid "free" credit score sites.  You cannot obtain your true credit score free.

Erica is now on her way to build a credit history, starting with a "secured" card.

As always, don't waste your money.

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