One simple way to improve your ratio is to redistribute your debt. If you have a big balance on one card, for example, you could transfer at least some of the debt to other cards. It’s typically better for your scores to have small balances on a number of cards than a big balance on a single card.

You also could investigate getting a personal installment loan with your local credit union or bank, and use the money to pay down your cards. Applying for the loan may ding your scores a bit, but that’s likely to be more than off¬set by the improvement to your scores from reducing the balances on your credit cards. (Credit scoring formulas are much more sensitive to the bal¬ances on revolving debt, such as credit cards, than to the balances on installment loans.)

A riskier strategy might be to take out a 401(k) loan. These loans don’t show up on your credit report, but you do face a big hazard: Ifyou lose your job, you typically have to pay the money back quickly or you’ll incur taxes and penalties on the balance. If you decide to take a 401 (k) loan, make sure you’ll be able to repay the loan quickly to minimize the risk.

Whatever you do, don’t cash out a 401(k) or withdraw money from an IRA to payoff credit card debt. A few points’ difference on your credit score is not worth the short-and long-term costs you’ll pay for a premature withdrawal.

Although moving debt around can lift your scores, the best strategy for your numbers and your finances long-term is to payoff revolving debt either out of your current income, using cash that’s sitting in a savings account, or selling stocks or other investments, so long as they aren’t in a retirement account.

The credit-scoring formula is designed to judge how well you handle credit over time. If you have no credit, or you don’t at least occasionally use the credit you have, the formula won’t have enough information to make an assessment. You don’t have to live in debt to get a decent score, but you do need to use credit.

In the past, some people were able to get high credit scores without having much credit. Earlier incarnations of the FICO credit score gave scores over 700 to some people with just one or two recently opened accounts. The newer versions of the formula, however, make it much tougher to get a lofty score if you have a thin credit history.

You probably need to be concerned about your score even if you have no plans to take out loans. Now that insurers are using credit information for underwriting and rating decisions, your failure to maintain a credit history could cost you in the form of higher premiums.

It’s too bad that conscientious people who simply don’t like debt should be punished with higher premiums, and some states have even banned insurers from using a lack of credit history as a reason to raise rates. If your state hasn’t prohibited the practice, though, you might want to dust off your credit card and use it once in awhile.

Closing older accounts can also hurt you, because the formula notes both the age of your oldest account and the average age of all your accounts. It’s particularly important to keep your oldest account active, because shutting it could make your credit history look years younger than it actually is-and your score could drop as a result.

It may not be enough, by the way, to keep your oldest credit card in a drawer. If you don’t charge something occasionally, your lender could decide the inactive account is more trouble than it’s worth and close it for you. To keep it active, you might want to charge some small, recurring bill to the card-a magazine subscription, your gym membership dues-and arrange to have the balance paid off automatically each month.

I’m 30 years old and filed Chapter 7 bankruptcy when I was 22 years old. I was young and had high credit card limits. I was naive and went into a business partnership that went sour which caused me to file for Bankruptcy. Over the next few years I started researching on how to rebuild my credit. At the time, I knew nothing about credit scores and FICO’s. Over time I was able to raise my FICO to the 650 range. I had multiple credit cards with limits anywhere from $500 to $8000.  I was even able to get car loans, although the interest rates were absurd.

Everything was going great until my entrepenerial spirit kicked in again. In Dec 2007, I started a business and used my credit cards and a personal loan to fund the startup. This was great until the funds ran out and the income was not rolling in. I now have over $60,000 worth of debt, including secured loans, equipment leases and credit card debt. I have been unable to make minimum payments for 6 months now and left the credit cards go to collections. I have managed to work out some hardship programs with most of them, but some credit card companies have already been charged off. I just checked my FICO and it is now anywhere from 428 to 540, depending on the bureau.

So that is where I stand. I hope you follow along as I try to rebuild my credit score and start on a long road to credit recovery.