You know how important your credit score is. And with lenders reluctant to offer good loan terms to any but those with with the best scores, it is vital that you do what you can to improve your credit score. Credit Karma offers you a way to simulate the effects your actions have on your credit score.

A few months ago, I wrote about how Credit Karma offers great education tools — as well as free access to your credit score. Now, Credit Karma has added a practical tool that can help you figure out how you can improve your credit score. It also provides a handy guide to what might happen if you take on more debt, open a new credit line or even apply for an auto loan or home mortgage loan.

As I tinkered with the program, lowering and increasing my credit score, I found that one of the most effective ways to increase your score is to pay off debt. Paying off debt and having a good payment history largely erased the ickiness that I had gotten my simulation into by opening new credit card accounts, paying late and getting a car loan. And, of course, that bankruptcy I simulated didn’t help much, either.

Ken Lin, founder and CEO of Credit Karma, sent me this in an email regarding the credit score simulator:

We hope that consumers will be better able to manage their credit if they understand how their everyday financial behavior affects their credit score.

Overall, I think this a great tool. Before I make another credit and debt related decision, I’ll probably head over to Credit Karma to get a look at what it will do to my score.

images source: Screenshots from Credit Karma

One of the classic ways that students have been able to improve their credit scores has been through the “authorized user” loophole. In this scenario, you are added as an “authorized user” to someone else’s credit card. Preferably someone who has good credit (traditionally your parents ). This boosts your score almost instantly.

As you might guess, it didn’t take long until someone figured out that you could make money doing this. Want to improve your credit score before buying a house? Lay down your money and get paired up with someone else who is willing to let you “piggyback” on their account. The person with good credit gets paid, and you — even though you never actually use (or even see) the credit card account on which you are an “authorized user” — get the score you need to get the loan you want.

Closing — and reopening — the “authorized user” loophole

Last year, FICO, the leading credit score provider, decided that it was time to close the authorized user loophole. The company announced that it would no longer count “authorized user” accounts. The idea was to prevent people from buying their way to a falsely improved credit score.

Now, though, FICO is changing its tune on “authorized user.”

Read more

Because a good credit score can save you thousands in interest charges and affect a variety of aspects of your personal finances, it is important to:

Improve your credit score.

You can get an idea of your credit score for free from Credit Karma. And then you need to take these steps to improve it:

1. Make all payments on time.
2. Lower your debt.
3. Avoid inquiring about getting more debt.
4. Choose debt that is “better.”

This post is part of the b5media Business Channel Great Blog Off! Find out more about the Blog Off here: http://www.b5media.com/b5media-blogs-for-a-cause-and-raises-money-in-support-of-charity/

The Business Channel is supporting Accion International for the Great Blog Off. You can make a donation directly to Accion (http://www.accion.org/b5media). Donations are tax deductible.

A lot is written about your credit score:

1. How to improve your credit score (from paying down credit card debt to paying your bills on time).
2. What goes into a credit score (payment history, amounts owed, etc.).
3. Why your credit score is important (better rates, loan approval and more).
4. Where to find your credit score (MyFico.com, major credit bureaus).

But what isn’t addressed very much is how much you will pay to see your credit score.

It doesn’t cost that much: $5.95 to $15.95 per score, depending on where you go and the services that come with it.

But it still costs money. And you usually have to pay for each score individually — unless you get some sort of complete score, which will cost between $35 and $50 for a report plus all three scores.

Quite honestly, I think that lenders and creditors, employers and landlords, should pay to see this information and only after you have granted your permission.

But I think that you should have access to it for free. And not just the free annual credit report from each bureau that is required by law (it doesn’t include your credit score). It’s information about your life and your habits and it affects your personal finances in a very real way. You shouldn’t have to pay for what already should be yours. But you do anyway.

What do you think? Should you have to pay to see your credit score?

image credit: sxc.hu