Mellody's Mail: Cleaning Up Your Credit

Create a plan and stick with it. The best way to improve your credit is to set realistic goals and commit to a timeline for reaching each goal. Given its weight in your overall credit score, the first goal on your list should be paying your bills on time. If necessary, contact your creditors to arrange for a payment plan that you can manage, thereby preventing future late payments.

Next, when thinking about which debts to tackle first, generally, credit card debt is the most expensive (i.e., credit cards carry the highest interest rates), followed by car loans, mortgages and student loans, so you should start with credit cards. If you have more than one credit card, pay down those balances that are the largest relative to the credit limit first. While it is best to pay down all of your debt completely, you should initially aim to reduce the amount of your total debt to 30 percent of your credit limit. For example, if your credit limit is $1,000, you should reduce your debt to a maximum of $300.

Although it is a good idea to reduce the number of credit cards you have, you need to do so very carefully. Because your credit score looks at the difference between your available credit and what you are using, if you close down accounts, you are reducing the amount of available credit, which could make your existing debt seem larger. As such, if you choose to close out accounts, do so slowly and close the newest accounts first, so as to maintain your long credit history (having one card for at least two years is good for your credit score). Additionally, in closing the accounts, it is important to confirm that all accounts are reported as "closed by customer."

Avoid new debt. When working to improve your credit, do not accumulate more debt. The best means of prevention is to use debit instead of credit; pay more than the minimum on all of your debts; and most importantly, do not apply for additional credit cards.

Lastly, remember, no one can improve your credit quickly, so do not seek the services of any organization or person who makes such guarantees. Rather, the only person who can improve your credit is you.

E-mail Mellody with your personal finance questions.

Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is "Good Morning America's" personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.