Boost Your Credit Score (and Attractiveness) in 3 to 12 Months

The benefits of stellar credit are pretty obvious: If you've got it, you'll sail through every financial approval process, getting the best deals on credit cards, utilities, insurance premiums, mortgages, and car and student loans. Just a few points one way or the other means pocketing or paying out tens of thousands of dollars. Heck, you may even get a better job -- many employers these days use credit reports to spot behavioral red flags.

If that's not enough to convince you to care about your credit rap sheet, how about this: Having good credit makes you hotter.

That's right -- handsome credit makes you more attractive to potential partners. A whopping 76% of respondents in a myFICO.com survey said "pays bills on time and has a good credit history" was the third-most important factor in sizing up a mate, right behind "has a sense of humor" and "has a steady job." (Evidently, "has a flair for accessorizing" and "can rewire my electronics to provide surround sound" did not warrant inclusion in this particular survey.)

Clearly, modern love has a strong practical streak.

If you need any more motivation to start caring about your credit, consider that across the board, lenders have greatly tightened their standards (thanks, subprime mortgage mess!). Whether shopping for a loan, homeowner's or auto insurance, or even a new job, stellar credit is the key to emerging unscathed.

Oops, Not My Bad

You can check out your reflection -- pull your credit file for a look-see, that is -- for free once a year at annualcreditreport.com, the FTC's official website. (You'll have to pay a small fee to get your credit score, however.) Take some time to review it. Consumer watchdogs report that as many as 80% of credit reports contain errors -- and one-quarter of those errors are significant enough to cause a FICO score drop of 50 points or more.

Good credit? Good news: Keeping it that way is easy. Simply continue to do what you're doing. Those on the cusp of decent creditworthiness can improve their lot in as few as three to six months. If your score suffers deeper scars, credit triage is about a 12-month process, though you'll start to see results in 30 to 60 days.

Here's what to do:

Concentrate on performance factors. Payment punctuality and credit-use levels account for 65% of the scoring equation. The blow to your score for any 30- or 60-day-late payment in the past year will begin to diminish after you mail the check. Recovering from a 90-day-late payment (a ding that can be as damaging to your score as bankruptcy) takes longer.

Keep balances low. Aim to use 35% or less of your credit line to avoid lenders' ire. Before any major loan application process (mortgage, auto loan, etc.), usage of 10% or less is ideal. Postpone big purchases, keep card use to a minimum, and pay down as much debt as possible.

Get more credit for your history. Do not close old or longstanding accounts, even if you no longer use them. (More on that in a moment.) Your credit history is helped by having a long life, and the scoring system measures the average age of your accounts. Closing your oldest accounts will shorten your established history. Canceling lines of available credit also hurts your credit utilization ratio (meaning the amount of credit available compared to the amount of debt you carry). Stop ignoring those old cards and give lenders some good news to report (instead of stagnancy) by using Ye Olde Plastic every six months to buy something small (and, of course, pay it off in full).

Improve the looks of your limits. Are lenders reporting accurate credit limits? If not, ask them to. (Don't bother with Capital One; it reports a customer's highest recent balance, which wreaks havoc on scoring accuracy.) Improve your credit utilization ratio by requesting an increased credit limit, but make sure the request won't require your credit to be re-pulled, triggering a "hard inquiry" and a potential five-point or more score deduction if more than a few are made within 12 months. Do not try to build creditworthiness by opening a home equity line of credit. A "secured revolving account" has little effect on your overall score, says John Ulzheimer, Credit.com Educational Services president.

Attack unattractive debts. Pay off no-money-down financing debts ASAP. Financing entries can raise red flags with lenders. You could consider paying it off with a home equity loan (HEL), since an HEL penalizes your score less because consumers are more conscientious about making those payments. Don't swap debts lightly, though, since the roof over your head is at risk if you don't pay. Even better is cutting back elsewhere so you can pay off the no-money-down deal faster.

Deal with collection accounts. In a strange karmic twist, paying off debts sent to collections won't improve your score much (the biggest hit comes earlier from the "charged-off-debt" designation). The exception: if the payment lowers your outstanding debt. Try negotiating with the collection agency (in writing) to have them mark the account as "paid as agreed" or remove the notation entirely.

Watch the clock when rate-shopping. Most mortgage and auto loan quote requests that occur within one 45-day period are treated as a single hard inquiry. However, some lenders still use the old FICO system, which allows just a two-week window of safe harbor, Ulzheimer says. So err on the conservative side.

Marry (your credit accounts) for love, not financial gain. Finally, if you meet Mr. or Ms. Perfect Credit, forget about wooing them solely so you can piggyback on their good credit reputation. In years past, adding a family, friend, or flame to your accounts was a fast-track way to help your loved one establish credit or improve a FICO score. When credit repair outfits started to use the loophole in highly suspect ways (by letting strangers rent access to other strangers' good credit DNA), FICO reworked its formula. As I've said before in this space, when it comes to credit, it's important to maintain the "you" in your union.

A good-looking credit record almost -- almost -- makes up for a week of bad hair days, according to Fool.com's consumer finance expert, Dayana Yochim.