Unless you live under a rock (in which case you are likely not affected anyway, so go back under there and be safe), you have heard of the economic crisis the United States is currently experiencing. This crisis is shaping up to be the worst thing we have seen since the market crash in the 1930s, and it is having a profound adverse effect on the economy of the rest of the world, as well.

When the US housing bubble burst, the crisis began, and it began reaching critical mass in 2007, with 2008 seeing the collapse of large firms like Bear Stearns and the federal takeover of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, known as Fannie Mae and Freddie Mac, respectively, among other major events like The Fed’s emergency bailout loan to AIG and Merrill Lynch agreeing to sell itself to Bank of America.

There are many different aspects to this economic crisis, and for each of those aspects, there are multiple adverse effects and reactions that are rippling out across the planet, but the very base cause is the subprime mortgage issue. Increases in loan incentives like easy initial terms and the trend of rising housing prices in previous years led borrowers to take on high or difficult mortgage payments under the impression they would be able to refinance into a mortgage with more favorable terms rather quickly. This coupled with the risky lending practices of the mortgage originators like giving loans to people that would otherwise be considered unworthy of credit, resulted in high default rates when housing prices started to drop and refinancing became more difficult.

Basically, people that could not actually afford it were encouraged to take on high mortgages, being led to believe they would be able to quickly refinance and get the payments down to a more manageable level while still acquiring a nice home. Once housing prices began to fall and refinancing therefore became more difficult, people were unable to keep up those high mortgage payments and began defaulting on payments. The foreclosure rate skyrocketed with over 1 million properties in the US being subject to foreclosure activity in 2007. It is not yet clear where this will end and if the actions the federal government is taking to try to salvage things will work, but there are small signs that the stock market may be recovering, albeit in small increments.

All potential lenders, landlords and employers seem to require a credit report before going any further with your loan, apartment application, or job interview. This report shows them exactly what your credit score is, and will alert them to how good or bad your money managing skills are. It also tells these people you really want to impress if you are reliable or not with repaying any debts.

For better or worse, your credit score is the one thing that will follow you all of your adult life. It will make a difference as to whether or not you get the car loan you really want. It will be the thing that makes it possible to be living in a cool apartment, or sends you back to your parents’ basement. A high credit score will put you in that sporty car you crave, or in that apartment where you can invite your friends with pride. Banks will be beating down your door to loan you money.

There is, however, the other side of the story. If you have a below average or poor credit rating, you will be counting change and hitting up your friends or relatives for money to pay large deposits and down payments. Otherwise, you will have no place to live, and no car to drive. However, it’s not all hopeless. There are several ways to pull your credit rating up to an acceptable rating.

All of your financial information will affect your credit score, be it positive or negative. Some of the information will have more an affect than others. When you are trying to make your credit score better, remember to start with the negative factors.

The first thing you need to do is start making any payments you owe on time. All payments are reported to the credit agencies regularly. Your credit score can improve within as little as 3 months just by paying your bills on time.

Getting a copy of your credit report and reviewing it carefully for accuracy is also very important. Sometimes you will find that a creditor has reported you for late payments when you have been making your payments on time. This means you will need to take the time to write a letter to the credit agency to dispute this report, requesting that a correction is made on your credit. Having proof of this will help make this correction take place quickly. If you only have your word for this, it will take much longer.

Open a savings account and keep at least $500 in it. This will help to improve your credit rating. That balance will give you collateral for a personal loan. A bank loan can raise your credit rating faster than anything else.

If your credit rating is particularly dismal, you need to understand that there is not a quick fix. It took you years to reach this point, and it won’t be repaired overnight. But don’t let this discourage you. Instead, look for the light at the end of the tunnel, which should start appearing within 3 months of your improvement actions.