In tough times, your personal credit score is as important as ever. But it can sometimes be challenging to know what to do in order to strengthen and protect your credit score, also known as a FICO score. We recently caught up with Liz Pulliam Weston, author of Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future , and asked her how people can take charge of their credit score. She also offers some good insights on credit cards, mortgages and other personal finance tidbits.

FiLife: What's the most important thing you can do to improve your FICO score?

Weston: The fastest and most powerful way to improve your score is to pay down debt, particularly credit card debt. That's because the FICO scoring formula is incredibly sensitive to how much of your credit limits you're using on each card and overall. 

FiLife: What's a simple thing to improve your FICO score that people may unintentionally overlook?  

Weston: This is more of a "how to prevent damage to your score" tip, but it's essential to pay your bills on time, all of the time. Even a single skipped payment can knock up to 100 points off your score. So consider automatic payments, either through recurring payments on an online bill pay system or by setting up automatic debits with your card issuers. 

FiLife: People are furiously paying down credit-card debt. What impact does canceling a credit card after it’s paid off have on your FICO score?

Weston: It's not going to be good, and it may be bad. Closing accounts can never help your scores and may hurt them because you're reducing your available credit. That narrows the all-important gap between your balances and your available credit limit, and the scoring formula tends to react negatively.

FiLife: Banks are cutting credit-card lines rapidly, eliminating an estimated $500 billion in credit-card lines in the fourth quarter of 2008. What are strategies for maintaining your credit line in times such as these?

Weston: If you have good credit (FICO scores of 720 or above), try to push back. You're still a desirable customer and can take your business elsewhere. Lenders know this, but hope you don't. Call up the issuer's customer service line and let them know you'll close the account if the credit limit isn't restored. (Make this an idle threat--you want to keep as many accounts open as possible in this environment.) If you meet resistance, try to get transferred to the customer retention department, which is usually more able to wheel and deal than the front-line phone reps.

If the issuer won't budge, consider opening up another credit account elsewhere. Your credit may take a slight ding, so don't compound it by actually closing the original account.

If you don't have good credit, you don't have as much leverage. Your best response is to pay down the debt as rapidly as possible so the lower limit has less negative impact. You also may want to talk to a bank or credit union about transferring the debt to a personal loan. The FICO formula is less sensitive to how much of your limit you're using when the debt is on an installment loan.

FiLife: A lot of people have homes that are underwater with little prospect of recovery. Should they walk away from their homes? What is the impact on credit scores when doing so?

Weston: Foreclosures and short sales, where you sell your house for less than you owe, can be devastating to your scores and the effect will last for years. Clearly, it's not a decision that should be made lightly.

But there's too much variation in people's circumstances to give any blanket advice. If you can afford the payments, sitting tight may make sense, although it may be a few years before we see a turnaround.

On the other hand, if you can't afford the payments and you have no prospect of a reasonable loan modification, then walking away may be the best of bad options.

I'd talk to a HUD-approved housing counselor and a bankruptcy attorney before making any decisions.

FiLife: If someone files for personal bankruptcy, what happens with their credit score and how long does it take to rebuild that score?

Weston: Bankruptcy is the single worst thing you could do to your credit score. How far and how fast it falls depends on how far behind you were on your bills when you filed, but most people experience a dramatic drop.

In the past, you could rebuild your score to near-prime levels (high 600s) within three or four years. These days, however, far fewer lenders are willing to take a chance on folks fresh out of bankruptcy, so it may take longer to rebuild your scores to acceptable levels.