I get asked this question a lot. The credit bureaus (and a lot of the so-called experts) will tell you that you just have to sit back and wait 7 years for bad credit to fall off your credit report.

Sorry, but this is not true.

The key is to know which factors influence your numbers so you can make better financial decisions:

1. Your payment history (approximately 35% of your score)
Have you paid your credit card bills on time? If not, then late payments, collection accounts, and other negative items can lower your credit score. So pay on time as often as possible!

2. How much you owe (approximately 30% of your score)
FICO scores look at the amounts you owe on all of your accounts. Also factored in are the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.

3. Length of your credit history (approximately 15% of your score)
The longer you've had credit the better. So, closing older accounts is not always a good idea. It is still possible to get a good score in a short period of time - if you've been responsible (by paying on time and not maxing out all of your credit).

4. New credit (approximately 10% of your score)
If you have recently applied for or opened any new credit accounts, this will have an affect on your credit score. So don't keep applying for credit every time you go shopping. And if you are making a big purchase, do your applications in a short period of time, and don't drag out your search for the best rate over a long period of time.

5. Other factors (approximately 10% of your score)
Other factors also can influence your score. For example, having different types of credit on your report (such as credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit) is normal for people with longer credit histories and can slightly improve your score.

How can you improve your credit score?

First of all, credit scores are not always perfect! Since your credit scoring relies on information found in your credit report, it may not be entirely accurate (since many credit reports contain errors). So, it's a good idea to get a copy of your credit report once a year, look it over, and make sure it is accurate.

And if you are planning a big purchase, do this a few months ahead of time so you have enough time to get the errors corrected.

P.S. Thanks to Couple Money for including us in their recent blog carnival.

One thing I really hate is hearing an ad for something that is "free" and then being charged for shipping or processing or some other junk fee. In my book, free means free - if I need to pay anything, then it's not free.

Or if I need to sign up for another service first, and only then do I get the item for free, then to me that's not really free either.

So quite often I get contacted by companies like FreeCreditReport.com to offer their products on my website. You know, the company with the catchy song on TV? Since they advertise the free part so loud and clear, you would imagine that your credit report would be completely free.

But is it?

Well, you must sign up for a trial of their credit monitoring service. Sure, you can cancel before the trial period ends. But that's a real pain. And the trial is only for 7 days. Otherwise, you get charged a monthly fee. So, is that really free?

Want to know the worst part?

You can actually get a free credit report without any strings attached. No fees. No sign up. No trials. So here's the service I choose to recommend:

www.AnnualCreditReport.com

Not that FreeCreditReport.com is dishonest. Or illegal. In fact, they tell you everything on their website. But like I said earlier - to me, free means FREE - otherwise I can't be bothered. So when those companies contact me, I say "no". Since it bothers me as a consumer to have to pay for something that is advertised as free, I won't offer to my site's customers. Maybe I'm being way too picky. Or maybe I'm being way too philosophical. What's the harm? They're just a company trying to make money, right?

Of course. But to me, FreeCreditReport.com is not really free. What do you think?