5 Steps to Improve Your Credit in 2015

As 2014 winds down, you're probably thinking about resolutions you could make and aspects of your life you'd like to improve upon in the next year. Maybe you'd like to move into a bigger house or refinance your current mortgage to save a little money. Or maybe you'd like to get a new job or upgrade to a new phone plan. But did you know that all these aspirations could be impacted by the state of your credit health?

So maybe your goal for 2015 should be to get your credit in tip-top shape first. After all, having great credit doesn't just come in handy when you want a new credit card. In addition to the aforementioned situations, it could save you thousands of dollars in interest, as lenders often use your score to determine the rates you'll pay to borrow.

Ready to start working on improving your credit health? Begin with these easy five steps:

1. Pull your credit reports.

According to the Consumer Financial Protection Bureau, fewer than one in five Americans check their credit report in any given year. Don't follow this trend. If you want to begin tackling your credit, your starting point should be your credit report. This important document is used to calculate your credit score, so it's critical to monitor your report regularly and ensure that it's updated and accurate. You can get a copy of your report from each of the three credit bureaus -- TransUnion, Equifax and Experian -- for free every year from AnnualCreditReport.com.

2. Dispute any errors.

Don't shy away from all the numbers and data on your reports -- you'll need to scrutinize everything carefully and fight any major errors you find. Check out our sample credit report to learn what to look for and how to spot red flags.

After you've circled the inaccuracies on your report that you want corrected, it's time to gather evidence to support your case. Then write a letter detailing what errors you're fighting, and send everything to the bureaus reporting the faulty information. While the dispute process may not be particularly thrilling or speedy, it'll be well worth your time if it results in your report more accurately representing your credit history.

3. Identify the factors on your report that need work.

After your credit report is free of errors, it's time to look at it again -- this time to see what you can improve upon. Don't forget: Your credit score is typically based off the following factors:

-- Percent of on-time payments. Since credit scores are meant to indicate how likely you are to make future payments on time, this factor is typically very important. In fact, just one missed payment could kill your credit score.

-- Open credit card utilization. To calculate your utilization rate, divide your total credit card balances by your total credit card limits. In general, it's best to keep this percentage as low possible, preferably under 30 percent.

-- Number of derogatory marks. Derogatory marks include negative records such as bankruptcies, foreclosures, accounts in collections, tax liens and civil judgments. These could severely damage your score, as they indicate you've had trouble managing credit in the past.

-- Average age of open credit lines. This factor averages the ages of your open credit cards, mortgages, auto loans, student loans and other lines of credit on your report. Lenders like seeing both a lengthy and well-managed credit history.

-- Total number of accounts. A larger number of open credit accounts could impress future lenders, as it shows that others trust you with credit.

-- Total hard credit inquiries. Hard inquiries typically occur when a potential lender checks your score to make a lending decision. A multitude of hard inquiries on your report may send a red flag to creditors that you're desperate for credit or aren't able to get approved for other lines of credit.

4. Devise a game plan.

Once you know what aspects of your credit you need to work on, set specific goals. For example, if your percentage of on-time payments is less than perfect, question why this is the case and then figure out how to solve the issue.

If remembering to make payments is the problem, consider enrolling in auto-pay or setting up a monthly text or email alert. If lack of money is the issue, look into other ways to you can make money, or closely track everything you purchase and see where you can cut back. On the other hand, if your utilization rate is the factor that needs work, try making payments more than once a month, asking your lenders for a limit increase or spending less money in general.

Whatever you decide to work on, don't forget to make your goals specific, as general goals like "I want to improve my credit" are too vague to quantify.

5. Execute (and wait).

Now comes the hard part -- carrying out your plan!

As with any goal, you may be more likely to succeed if you find someone to keep you accountable. Instead of updating your social media channels to tell your friends what you did last weekend, try mentioning your plans to improve your credit and ask them to keep tabs on your progress. Or, find a friend who also wants to work on his or her credit, and set up a system in which you check up on each other regularly.

It's also important to keep in mind that improving your credit health can take a lot of time and patience. As your credit score is based off so many factors, it can fluctuate despite your best efforts to improve it. In addition, factors like your average age of accounts depend on time passing for it to improve.

Lastly, don't be discouraged. By diligently working toward your goals, your credit health should eventually improve. Good luck and have a happy new year!