FACT: A "hard credit pull" - say when you're applying for a new credit card or a mortgage - will stay on your credit report for at least six months, and will lower your score, says Avinash Karnani, co-founder of justthrive.com, a free online personal finance management tool. But when you check your own credit report, it does not impact your credit score. In fact, checking your credit report and score is a "great tool, especially when you're making big-ticket purchases," says Charles Harris, an executive at FreeCredtReport.com. "The higher your score, the more likely you may be able to negotiate lower interest rates, which gives you more control over your personal finances."

FACT: Not true, says Lynnette Khalfani-Cox, author of Zero Debt: The Ultimate Guide to Financial Freedom (Advantage World Press, 2008). Under U.S. law, it is illegal for credit scoring to take into account race, age, color, nationality, religion, sex, or marital status.

FACT: That's not necessarily true, says Spencer Sherman, author of The Cure for Money Madness (Broadway, 2009) and founder of Abacus Wealth Partners, a wealth advisory company. "If you're up-to-date with payments, it will not likely affect your score," he says. To protect your score, try extending the term of the loan or negotiate a reduction in interest rate as opposed to a reduction in principal, he advises.

FACT: Having no credit history or never using credit can actually have a negative impact on your credit score, says Khalfani-Cox. In fact, people with no credit cards tend to be viewed as higher risk than those who have managed their debt responsibly. Credit rating agencies like to see that you have a history of paying credit obligations on time.

FACT: Library fines, even if they're small, can lower your credit score by as much as 50 to 100 points, says Rich Rosso, a financial consultant for Charles Schwab. The same applies for unpaid parking tickets and utility bills. If you pay up before the debt reaches a collection agency, you should be OK. Visit your library's web site to find out its collection agency policy, Rosso advises. "Every municipality appears to have various time frames for collection based on size of the debt and the length of time it's been in arrears." For example, Cedar Rapids Public Library in Iowa will initiate a courtesy reminder three times after items are due. If fines are still not paid and books are not returned, then the borrower's account may be turned over to a collection agency.

FACT: Not so, says Rosso. "Paying off a collection account will not remove it from the credit report. It will remain for seven years."

FACT: Stay away from store-brand credit cards. Approximately 10 percent of a person's credit score is based on the institutions from which money is borrowed, says Anderson. And finance companies, which are often used by retailers that offer their own credit cards, are considered higher risk than banks. "A prevalence of credit lines from finance companies could negatively affect your credit rating," he says.

FACT: That's wrong, Sherman says. "Most people stay just at the edge of their credit limits, but you want to stay well below your maximum available credit." That's because 30 percent of your credit score is dependent upon the percentage you are using of your total available credit. Aim to keep your balance within 25 percent to 35 percent of your credit limit.

FACT: Your income has no effect on your credit score, says Karnani. This myth may derive from a truth; namely, people with more money tend to have better credit scores. "People who make more money are less likely to be borrowing above their limits and paying for things on credit rather than using existing funds."

Still, anyone can improve his or her credit score by taking simple steps, Karnani says: pay down your debt, monitor your credit report to track how often you are applying for cards and loans, and make sure to keep your oldest credit card open so it remains in your credit history.

Freezing your credit card or burying it in the backyard is such age-old advice, it's practically a cliche. But letting your account go stale isn't a smart solution. If your account goes dormant, the company may stop reporting it to the credit bureaus ‒ or they could shut it down completely. Not only will your credit history be impacted, but an account that's been closed by the creditor carries more stigma than an account that's been closed by the consumer, according to Clarky Davis, the "Debt Diva" at CareOne Counseling, a credit counseling and debt management service in Columbia, MD. Again, the simplest solution is to set up an automatic monthly payment to keep the account active and maintain your credit history.

Opening new credit card accounts may seem like a good way to rack up more available credit, but every time a potential lender looks at your credit score, it counts as an inquiry ‒ and stays on your report for two years. Too many inquiries could hint that you're planning to open up several new lines of credit. "If you appear to be going on a credit binge, that will scare creditors," Levin says. But what if you're shopping around for a mortgage or car loan and simply want to find the best rate? No worries ‒ as long as you finish your applications within 30 days, your score won't be affected.

If you're juggling several sources of debt ‒ and these days, who isn't? ‒ experts will tell you to chip away at high-interest accounts first. But realize that everything from unpaid parking tickets to library fines can wind up on your credit report. "Look out for smaller bills that you may have overlooked," Davis cautions. She recommends extra vigilance after a move; a few leftover pennies on your utility bill may haunt your credit report for years. If you're having trouble keeping up with payments, resist the urge to stash your past-due notices at the bottom of a drawer. Instead, contact your lender and ask for a little lenience. "The truth is, more lenders are willing to be flexible right now," Levin says. "But you're never going to know unless you talk to them. The worst thing they can say is no, so don't be afraid to call and ask."

Merging your debts might make it easier to keep track of bills, and it could help you avoid astronomical interest rates. But lumping all of your loans together can also reduce your debt ratio if you're not careful. Arnold offers this example: Say you have three credit cards, each with a $3,000 balance; if you transfer those balances to a zero-interest card with a $10,000 credit line, you're suddenly using a whopping 90 percent of the credit on the new account. "You've got great intentions, but it could tank your score potentially," Arnold says. You may also be hit with hefty interest rates after the card's introductory period ends, which will increase the amount you owe. But consolidating isn't always a bad idea ‒ if you do your research and find a good rate, you could save thousands in interest, and that might offset any resultant blip in your credit score.

With credit cards offering attractive rewards programs, it may be tempting to put every purchase on plastic. But even if you pay your balance in full every month, racking up too much debt can wreck your score ‒ you'll get points for paying on time, but your credit report will show a consistently high balance. "Be mindful of how much you put on your credit cards," Levin says. "If you have an unusually large balance, it may not be a bad idea to pay it early just to keep that balance as low as possible."

There's a scary side note to your spending habits. Some credit cards companies are now tracking where customers shop and penalizing them for purchases that could signal financial difficulties. Swipe your card at a red-flagged establishment ‒ such as a discount store, auto repair shop, or even a marriage counselor ‒ and your creditor may lop your credit line or hike up rates. "People are making analyses of everything we do, and we have to act accordingly," Levin advises. "Whether it's right or wrong, fair or not fair, that's the way it is."

In a topsy-turvy economy, you may be tempted to avoid all debt like the plague. It's a good idea in theory, but if you don't have a dime of debt to your name, lenders have no way to gauge whether you'll be a reliable borrower. "It's a double-edged sword," Levin explains. "The good news is, you can sleep at night. The bad news is, when you're trying to get something that requires credit and you have a thin file, they really can't find much of a history." A sizable chunk of your score reflects your ability to handle a few types of credit (such as mortgages or revolving credit). No debt means no track record ‒ and that could cause your score to suffer.

You don't want to find out about a flaw in your credit report when you're bidding on a new house or negotiating with a car dealer. So be proactive: Once a year you may request a free copy of your report from annualcreditreport.com, which is sanctioned by the Federal Trade Commission. Should you need access to your credit reports at other times throughout the year (if you're about to make a home purchase, for instance), you can always request them via FreeCreditReport.com for a small fee. Comb through it to make sure there are no glaring errors, and be extra-vigilant if you have a common family name. "John Smith III could have creditors that show up on John Smith II's credit report," Davis cautions. If you spot anything fishy, file a dispute form immediately and keep a written record of it. After all, you've worked hard to ensure the best credit score possible ‒ and it's up to you to make s

One major misconception, Clark says, is that people often confuse "credit report" with "credit score." While the terms may sound similar, one is actually built upon the other. "A credit report is an objective history of who you've been as a borrower - it passes no judgment," says Clark. "The credit score is a subjective evaluation of that history." Whether it's a credit card, car loan, or mortgage, lenders want to know your level of risk, and how likely it is they'll get paid on time.

The terms "credit score," "credit rating," and "FICO score" are often used interchangeably, explains financial expert Ethan Ewing, president of Bills.com in San Mateo, Calif. "This is basically correct. FICO simply refers to Fair Isaac Corporation, the company that originally developed a 'score' method of rating consumers' credit histories."

Today, the three major reporting agencies (Experian, Equifax, and TransUnion) each report their own credit scores. For instance, there's the Plus Score, calculated by Experian; the Empirica Score, offered through TransUnion; and Equifax's Beacon Score. And what are lenders really looking at? "Different creditors use different factors to rate overall credit worthiness," says Ewing. "It basically comes down to whether you pay - and pay on time - and whether creditors have reason to believe you might be overextending yourself." The more responsible you are with credit, the higher your score will be. If you're included in the estimated 45 percent of consumers who don't know their credit score or 32 percent who've never checked their credit report, it's time to do some homework.

While you won't be quizzed on this later, you can earn some real-life "extra credit" (and lower payments) by studying the factors that drive your credit score. Doug deBruyn, a Seattle-area loan originator and certified mortgage planning specialist with VanDyk Mortgage, teaches a credit-scoring class for realtors and consumers, and shares his smarts to help you pass your next nerve-wracking credit test with flying colors. Sorry, there's no "cramming" come loan-time.

Are you paying your bills as agreed? The most recent six months has the greatest impact on your score. The highest weight is placed on the highest payment. Usually, this is your mortgage, next would be a car payment, followed by student loan or credit card payments. Bankruptcies, judgments, liens, and collections/charge-offs will negatively impact your score, as will late payments. FYI: The severity of the delinquency is determined by the amount, how much time has passed, and the number of times you were late on an account. It could be 30, 60, or 90 days late.

This is the actual dollar amounts you owe on various accounts in relation to how much credit you have available. You want this ratio as low as possible. Keep in mind, mortgages and installment loans are not factored into this as much because they are not really a credit line. FYI: If you're thinking of applying for a home loan, don't pay off collections or judgments prior to qualifying. By paying off the collection, you are, in effect, starting the collection process all over again; accordingly, your score will take a big hit. Pay off the collection at closing. Once you have the loan, you can handle a few months of a lower score.

How long have you been credit worthy? If you have a long history of making payments as agreed, it will help your credit score. But this can also hurt older people. By closing old accounts, you are removing all those years of payment history from the credit-scoring model, which is why experts urge you keep accounts you've managed efficiently open. FYI: One thing lenders had done in the past with younger borrowers is to have the parents add the child as an "authorized user" on to a credit card account they have had for 20 years. This immediately upped the credit score of the child because he/she had "inherited" a long credit history. However, within the past year, credit bureaus began ignoring any "authorized user" accounts when figuring out a borrower's credit score.

Ideally, the credit bureaus like to see a mortgage, an auto loan, and three to five credit cards. For a borrower, if you have a Home Equity Line of Credit (HELOC), it will be treated as a revolving account unless it is greater than $40,000. FYI: If it is greater than $40,000, it will be considered a mortgage.

Each inquiry will take points off of your score. Multiple inquiries for a mortgage within 45 days will only count as one inquiry (the fact that you're "shopping around" is a given). Likewise, multiple inquiries for a car loan within 45 days will count as only one inquiry. FYI: Only the first 10 inquiries count each year. Inquiries for a job, insurance or utilities, an account review, a promotion (pre-approval offers in the mail), or your own personal review won't affect your credit score.

When it comes to mortgages, car loans, and credit cards, what you don't know can certainly hurt you. Your score is a reflection of your actions: choose the behavior, choose the consequence. According to the Gallant Group, a diversified investment and financing firm:

1. 30 days late on a payment can damage your credit score by at least 50 or more points;

2. 60 or 90 days late, or a 30-day late payment on multiple accounts can drop your score by 100+ points;

3. Balances more than 40 percent of your credit limit affects your score by as much as 100 points;

4. If multiple credit cards are maxed out or approaching maximum balances, your credit score will be diminished by at least 80+ points.

"It's important to understand the tapestry of credit that we're weaving" says Clark. "The choices you're making even right now can affect your credit score." If you plan to borrow money in the next six to 12 months, you simply can't afford to turn a blind eye. If you keep your credit report healthy and cared for, says Clark, you'll have nothing to worry about come scoring time.

Those at risk of going over the 30 percent mark may want to consider splitting the debt onto two cards says Becky Palmer, education director for the Consumer Credit Counseling Services of New Hampshire and Vermont.

"Consumers are better off spreading their [debt] balance over different cards than accumulating all the debt on one, but it all depends on your credit history" says Palmer. "Seeking too much credit will create inquiries in your credit history, which in return will hinder your score."

Palmer recommends dividing debt up between two cards only as long as the consumer pays off both cards each payment period. If debt looks like it's beginning to spiral out of control, she advises consumers to consolidate debt back down to one card and focus fiscal resources on paying it off fast.

The easiest way to avoid changing credit card terms is to prevent a disaster before one strikes. By taking active steps to raise your credit score, consumers can help prevent card issuers from raising interest rates and lower credit limits.

"There are a number of simple things people can do to help their credit score," says Candy Wright, Immediate Counseling Group manager for the Farmington Hills, Michigan-based nonprofit, GreenPath Debt Solutions. "Check your credit report to make sure it's accurate. Don't overextend yourself financially. If you have a lot of open credit that you don't use anymore, close that... The higher your credit score is, the less credit card companies will regard you as a risk."

One of the easiest (and fiscally beneficial) ways to hang on to your current credit terms while simultaneously improving your credit score is to enter a debt elimination plan through an accredited credit counseling agency, says John Keller, spokesman for the American Credit Foundation, a nonprofit credit counseling service based in Midvale, Utah.

"Those enrolled in a debt consolidation program get concessions from creditors and won't have their credit terms changed," says Keller. "When clients are in a [credit counseling] program, they're protected from sudden changes credit issuers might make."

Keller advises those in need of credit counseling to seek an agency that's nationally accredited and certified by the National Institute for Financial Counseling Education.

How can you lose your interest rate and credit limit overnight? One way is to default on any loan or card.

"The only way to keep your current credit terms is to remain in good standing, not only with your current card, but with all creditors on your [credit] report," says Wright. "You can actually lose your terms on one card if you miss a payment on another."

To ensure that your payments arrive on time every month, try keeping a debt calendar that shows when you have credit card bills coming up or enrolling in an automatic bill pay program.

If you want to hang on to all of your cards ‒ even the rarely used ones in the back of your wallet ‒ brush the dust off and use them, says Palmer.

"A lot of companies are starting to close accounts if they are not being used, even if you have good credit history," says Palmer. "To ensure that a long-standing account isn't closed due to inactivity, charge a small amount and make sure you pay the balance in full."

The advice especially applies to consumers who keep a special card around for emergency use only. Those who don't use the card periodically may find that it's unavailable when emergencies pop up.

Instead of defaulting on a debt, Wright recommends taking proactive steps to preserve your current credit rates.

"If you have, say, an old medical bill that's about to go to collections, credit card companies have hardship programs that can prevent you from defaulting," Wright says. "These programs are temporary, but they give consumers the opportunity to repay their debt rather than have it damage their credit score."

Usually lasting anywhere from six months to one year, hardship programs offer lower interest rates and better repayment terms temporarily for trusted consumers stuck in a financial bind. While the credit issuer usually suspends credit use during the hardship program, those who enroll will have the opportunity to reduce their debt, lower their card payments, and will have a higher likelihood of keeping their current credit terms.

If you do lose your credit card terms, you may be able to get them back simply by asking how. A 2007 survey by Consumer Action, a nonprofit credit education and advocacy group based in San Francisco, shows that if a consumer's interest rate is raised, 75% of all banks would lower it again if the cardholder maintained a consistent payment record.

"If [the consumer]'s been an outstanding client and their history with that creditor is really high, there's a chance that they can call in and get their conditions changed," says Keller. "They should also remember that ultimately that decision is up to the creditor."

While there's no guarantee that a phone call will win credit terms back, being honest and communicating directly with your credit card company is perhaps the only way to hang on to the credit you currently have. "I don't have a bad credit reputation, but with the way the economy is, they said that I'm suddenly a risk," says Brown. "If it can happen to me, it can happen to anybody."

Don't avoid using credit. If you don't use credit, you won't have much of a credit score. "A credit score is an important tool companies use to protect themselves," Sweet says. The lower the score, the higher the risk, and this can affect whether or not a loan is approved.

Don't miss payments. Paying a bill late will hurt your credit, but missing a payment will damage it even more. "If you do so, you can't make it up," Sweet says. In other words, making two payments in the next billing cycle will not remove the blemish from your credit history. Whether or not you pay your bills on time determines 33% of your score.

Don't limit loan types. Despite what your bank account may think, a car payment and a mortgage may not be enough. Also managing an installment debt, such as a credit card, is a good indicator of credit savviness. There are five elements to the credit score model and revolving credit, which allows consumers to charge and owe different amounts each month, is one of them. "It's 10% of the score," says Gail Cunningham, vice president of public relations for National Foundation for Credit Counseling.

Don't close unused credit card accounts. Actually, just use caution, says Sweet. A factor in credit score models is your utilization, which is your debt vs. how much is available. For instance, if you owe $4,800 on a card with a $5,000 limit, you're using most of your available credit and this "utilization" will have a negative impact on your score. Counting toward 30 percent, your utilization is the second highest factor in your credit score. You should charge no more than 30% of your available credit, recommends Cunningham.

Don't be a credit tease. Don't run up charges all over town or apply for several cards at once while looking for the best rewards program. Recent inquiries means that you have accessed your credit and this can affect your score negatively. "This signals that you're desperate for credit and don't have enough cash available for your purchases," says Cunningham. She adds that if you are shopping for a major purchase, such as a mortgage or car loan, the inquiries will usually roll together into one.

Don't rob Peter to pay Paul. Don't charge anything unless you know how and when you are going to pay it back. One of the benefits of credit is the ability to spread out payments on a big purchase, not to delay paying with hopes that the money will come in ‒ from somewhere. If you need to use a credit card for convenience, use a prepaid card or a secured card that enables you to make payments to your own line of credit.

Don't get on the call list. When a debt turns into a collection account, it's an indication that you got yourself in hot water. Once a collection agency jumps into the arena, it becomes the owner of the debt, which will show on your credit history. Trying to make payments to the original debtor will not make the collection agency or the negative mark on your credit go away.

Don't forget the little things. That library fine you didn't pay or the health club contract you signed but didn't honor can show up on your credit report. Any debtor has the right to report unpaid bills to the credit bureaus, and many of them exercise that right.

Don't negotiate. On paying less than what you owe, that is. If you cannot repay a debt in full and a creditor agrees to settle for less than you owe, you haven't won the battle. The transaction will be reported as a settled account and this will hurt your credit score. Instead of negotiating to lower the overall amount of the debt, ask to have your interest rate or monthly payment lowered so that you can continue to pay the debt off in full.

Don't give up. If you have late payments, missed payments, defaulted loans, and similar credit mess-ups in-between, don't give up and think that your credit history is ruined. Although offenses like these generally stay on your credit history for seven years, the recovery clock doesn't start ticking until you have one full month of paying all of your debts on time, says Sweet.