Unless you reside on a desert island, out of contact with the rest of the world, you will have a credit report.

Information about your utility bill payments, credit cards, mortgage payments, registered address and even financial associates are logged on your credit report in an attempt to accumulate enough information to be able to judge you as a potential customer when you shop for your next mortgage, phone contract or loan.

A credit score is generated using a mathematical formula and comparison of the consumer's spending and credit history with those of others. The resulting figures are then converted into a score that is used by prospective lenders to analyze how much of a risk it is to lend money to someone. A bad credit rating reflects a history of missed payments on credit cards, loans, utility bills, mortgages and overall bad money management. A decent credit score will reflect the opposite.

Someone with a bad credit score will be refused loans, finance and credit cards or, if their applications are accepted, they are likely to pay higher rates of interest than people with good scores. This is due to them being in a higher risk category; their score alerts lenders to their being more likely to default on repayments. However, a credit score can be affected positively as well as in a damaging way, even if a consumer currently has a negative credit report.

For a consumer to improve their score, it is wise for them to first find out their current rating. Thanks to the 1974 Consumer Credit Act, it is now a statutory right for any person to be given a copy of their credit rating. These can be acquired, either online or in a paper-based format, for a minimal fee, from any one of the three major credit-watch companies: Callcredit, Equifax or Experian and then checked for any errors or expired events that may still be affecting a credit score. You will be able to see what lenders see when they check your credit history and request for any changes or corrections to be made in advance.

Money management is the next recommended stage. A credit score can be affected positively simply by making repayments in full and on time. Making sure that outstanding charges are consolidated and paid off can also have a positive effect. With every debt and bill being paid off the rating is gradually reversed until it is able to become a good one.

In the absence of accessible loans or credit to help them consolidate their debts, many people with unfavourable credit ratings turn to credit cards that are offered to high-risk clients by many banks. This may be a usable system but only if it is operated properly and not allowed to increase the spiral of arrears. It is better for them to be used as a means of support over short periods of time, with the following repayments being made in full so as to avoid incurring any unnecessary interest.

Decent credit scores are also given to individuals who are believed to show proof of stability. This means that homeowners are favoured over individuals who rent and those who are employed are preferred to the self-employed. Credit card debt is judged very harshly and as such is worth keeping to a minimum where possible.

It is advisable for those looking to stabilise increasing credit debt to switch their balance in order to benefit from interest-free introductory periods. Compare credit cards and find the best rates available, or better still find an unsecured loan and lose the credit card.  In this case it is advisable to use a loans comparison site, such as The Motley Fool (www.fool.com), for the latest information.