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The current credit crunch has created tighter guidelines for individuals searching for home loans, college loans and car loans.

Despite the recession, the need for credit is still important to many consumers. As banks hunker down on lending, consumers must figure out ways to improve credit scores to survive our current financial crisis. The national average is around 676 and individual scores can be anywhere from the low 300s to the 800s. Residents of Minneapolis can claim the highest credit score, according to MSN. But, where does a credit score come from?

How Your Credit Score is Calculated
Your FICO score is determined by five different elements, each weighted differently, that determine your creditworthiness.

·    Your payment history accounts for 35%.
·    Your debt to credit ratio or the amount you owe accounts for 30%.
·    Your credit history length accounts for 15%.
·    Your new credit accounts for 10%.
·    Your types of credit account for 10%.

This algorithm determines your credit score, which is a predictor of risk. The lower your risk, the more risky you are considered. If you rent an apartment, own a home, or have a credit card, you should get to know your credit score. If you fall anywhere on the mid or low range, it’s even more important that you raise your score. If you’re asking how, here are a few ways to improve your credit score:

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Pay Your Bills on Time: “Never make a short payment, never make a late payment and certainly never skip a payment,” says Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling. For the sake of payment history, paying the minimum payment due is better than skipping a payment.

Limit Credit Card Spending: If you’re credit card limit is $1,000 than you should limit your charges to $300. To improve your debt to credit ratio avoid charging more than 30% of your available credit. “Creditors don’t like to see you maxing out your available credit,” says Cunningham.

Keep Credit Cards Open: You might think closing credit card accounts will improve your credit score, but it’s the opposite. Don’t close any cards because you want to project a lengthy credit history, says Cunningham.

Avoid Applying for Numerous Accounts: Applying for too much new credit can be viewed negatively by lenders. Only apply for what you truly need.

Read Your Credit Report Carefully: If anything on your credit report is inaccurate, fill out a dispute form and inform the credit bureau. To view your free credit report, contact