Oprah's Debt Diet: Step 7, Part 2

Step 1: How Much Debt Do You Really Have?

Chart Your Debt

Get Your Credit Score

Prioritize Payments

Step 2: Track Your Spending and Find Extra Money to Pay Down Debt

Find Your Latte Factor®

Use the Latte Factor® Calculator

Step 3: Learn to Play the Credit Card Game

Pay More than the Minimum Payments

Lower Your Interest Rates

Four Tricks of the Credit Card Companies

Which Credit Cards to Tackle First

Step 4: Stop Spending

Step 5: Create a Monthly Spending Plan

The Monthly Spending Plan Worksheet and Pie Chart

Use the Monthly Spending Plan Calculator

Assign Paychecks to Expenses

Step 6: Take Big Steps to Grow Your Income

Facing Hard Choices

Selling Assets

Earning More Money

Step 7: Prioritize Your Debts and Raise Your Credit Score

Prioritizing Your Debts

Raising Your Credit Score

Step 8: Understand Your Spending Issues…and Save!

Why Do You Shop? Self-Assessment Quiz

How to Protect Yourself and Start Saving

Choose a Topic

Budgets and Tracking Expenses
Buying or Selling a Home

Credit Cards

Financial Planning and Investing
Credit Reports and Scores

Savings and Retirement

Loans

Meet the Experts

David Bach

Glinda Bridgforth

Jean Chatzky

People Who Saved Big Money

Share Your Stories on the Message Boards

Before and After Oprah's Debt Diet

The Bradleys

The Egglestons

The Widlunds

Watch Video Highlights

Buy Oprah's Debt Diet DVD

Step 7: Prioritize Your Debts and Raise Your Credit Score
Part 2: Raise Your Credit Score

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Working on your credit score is also an important part of this process. Why? The higher your credit score, the lower you can reduce the interest rates you're paying to all of your creditors—mortgage lenders, auto lenders, credit card companies. If you're in debt, then servicing those debts takes a big chunk out of your monthly nut. A high credit score can make that chunk as small as possible.

What is a credit score?
A credit score, sometimes referred to as a FICO score, is a numerical representation of the information in your credit report. FICO credit scores, which look a lot like SAT scores, range from about 300 (though it's rare to see one below 500) to more than 850 (equally rare). These scores pack a powerful punch. Last year, 25 billion credit decisions were made based on FICO scores alone. These weren't just decisions about whether you'd be approved for a new credit card but:

How much you can borrow
What sort of interest rate you'll pay
Whether you'll qualify for an increase in your credit line
Whether you'll qualify to rent an apartment
Whether you can get a cell phone
Whether you'll qualify for a cash advance
Whether you'll actually get the credit card for which you're "pre-approved"

In other words, your score is a really powerful piece of information. And because what it really is, for lack of a better description, is a snapshot of your borrowing and bill-paying behavior over the previous 24 months, as time goes by you have the power to change it for the better.

35% of your score is based upon how well you pay your bills.

30% of your score is a measure of how much credit you have available to you and how much of that credit you're using.

10% is based on your search for new credit—how recently have you opened (or inquired about opening) new accounts?

10% is the composition of your file. What percentage of your file is bankcard debt and what percentage is installment debt?

15% is a measure of the length of your credit relationships. How long have you had the cards in your wallet?

How to Boost Your Credit Score

Print the FICO-raising advice sheet.
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Please note: This is general advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio. Harpo is not responsible for any losses, damages or claims that may result from your financial decisions.