Step #4: Pay down as much of your debt as possible

If you have $10,000 in credit across several accounts and have outstanding balances totaling $9,999 of it, chances are your credit score is lower than it should be - even if you make your payments on time!

That's because lenders and credit bureaus look at your debt-to-credit ratio to judge how credit-worthy you really are. The lower your ratio, the higher your credit score. So whatever you do, learn how to pay down those debts!

However, keep in mind this doesn't mean you should open up NEW credit accounts in order to make that ratio smaller.

Next: Step #5: Don't ditch your credit cards unless you have to