If you think about it, improving your credit is pretty easy. You just have to do the things that make you attractive as a borrower. You don't need to use any fancy tricks, you don't need to pay for a system, and you don't need to spend precious hours on the process. What you do need to do is simply pay off your debts as agreed.

Sunk Cost

In the field of Economics, there is a concept called the “sunk cost.” The sunk cost is a cost you have already paid, and you cannot get the money back. For example, pretend you are playing poker and you have an extremely weak hand. Assume that through the course of this hand, you have chipped in $20. Suddenly, you get another card and realize that you probably won't win this hand. You have to make a choice. Do you stay in the game or do you fold?

You should base your decision solely on whether or not you think you will win the hand. However, your $20 in the pot may nag at you. You may have the following thought: “I've already put in $20. I should just keep playing (and adding to the pot) to see if I can get it back.” Of course, that would be the wrong course of action. Your $20 is most likely gone, and you need to look forward, not backward. While this is a relatively simple example, multimillion-dollar businesses struggle with the same problem. It is difficult to let a sunk cost go.

Keep It Simple

Use your best judgment when you think about your credit. If you wanted an executive summary of the best ways to improve your credit, it would read something like this:

• You can't change the past; focus on the future

• Start small, and work your way up

• Variety is the spice of life — use different types of loans

• Everything is best in moderation, including debt

• Always pay at least the minimum on time

• Check your credit reports at least once per year

• Credit is like your brain — use it or lose it

Looking Forward

Just like the best businesses, you should look forward when making decisions. Of course, you can learn something from your past experiences. Most notably, you may have learned what not to do. However, do not dwell on those experiences, and don't let them drag you in the wrong direction. All of your future decisions should be decisions that will improve your situation going forward.

If you have made mistakes in the past, there's nothing you can do to correct those mistakes. Your best bet is to use credit responsibly. Without a doubt, people will notice. Your credit reports will show that you are a responsible borrower. In turn, your credit scores will increase. If you can simply focus on doing the right things going forward, your credit will follow.