Microsoft does say that you can perform an in-place upgrade from Vista to Windows 7 so long as both are the same level of versions and you do not go from 32 bit Vista to 64-bit Windows 7 or vice versa.
First, back up all documents, pictures, videos, and music files you have on your current computer, and unplug or turn off all USB / FireWire devices. In addition, take out all cards in PCI slots except the video card. The less in and out the computer, the more likely you get a successful installation.
Turn on the computer and place the upgrade disk in your DVD drive.
Restart the computer and look at your screen carefully as it reboots. Before getting to the Windows logo screen, you should see an option to change the boot order. Each BIOS is different but for instance it may say "F12: Boot Sequence". Or that option may be inside another option that you initially see during the reboot. Hit the key on your keyboard to enter the boot sequence page of your BIOS. If the screen quickly changes and you miss the chance to hit the key, do not freak out. You can reboot the computer and try again. Once you open the boot order page, you should see that the first or second boot device is set to SATA hard drive. Change the first boot device to CD/DVD drive so that your computer boots from the Windows 7 upgrade disk.
The computer will start loading files from the disk. ALWAYS be patient and do NOT play with your keyboard or mouse except when you are asked questions.
When asked, choose Custom Installation (Advanced), not Upgrade.
After a while, you will see a screen showing all hard drive(s) installed on your computer and they'll ask which hard drive you want the operating system installed on. Highlight the drive and click on a small button Drive "Options" or something along the line which appears in the button right of the same screen. Then DELETE the hard drive, then FORMAT. This completely wipes out everything that exists on your current hard drive.
Then install Windows 7 on the newly formatted hard drive.
When asked to enter your license key, do NOT enter the key. UNcheck the box for automatic activation of Windows. And click on Next.
After the installation is finished, go to:
Start --> Right click on Computer --> Properties.
There you can enter your license number. If your Windows is not automatically activated, follow the instruction there. They tell you to call Microsoft to activate it.
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