Help Your Credit Score

When you have good credit, lenders will bend over backwards to give you a loan or line of credit. They know people with good credit scores generally pay back their loans on time and will entice them with low rates. But for people with bad credit, getting a credit card or loan can be difficult.

Past credit problems will fade over time by practicing good credit management. So what are the factors that drive your credit score and how can you use them to your benefit?

The Five Credit Score Factors:

Focusing on the major factors should have the most influence on your credit score.

Step 1: Pay your bills on time

Payment history is the largest contributor to your credit score. Late payments and account delinquencies will have serious negative impacts on your score. Paying your bills on time - every time - is essential to maintaining a good credit score. Use a calendar, software, or set up automatic payments to ensure you pay on time.

Step 2: Start reducing your debt

Mortgages and auto loans are generally long term notes with relatively low interest rates. Your revolving lines of credit, such as credit cards, usually carry higher interest rates. These are the accounts to tackle first. Reducing your debt-to-credit ratio should have a positive impact on your credit score. As an added bonus, trimming down your balances will also save you money on interest charges.

Ideally we would all have zero credit card debt. To kick start your debt elimination, you might consider opening a new credit card account that offers a 0% intro rate on balance transfers. These will allow you to pay down more principal and minimize your interest payments for up to a year.

Step 3: Avoid unnecessary credit lines

You want to hang on to your oldest revolving line of credit. That old credit card in the desk drawer just might be the account that keeps your credit score high. But you want to avoid unnecessary lines of credit. Have a plan, and don't just apply for every credit card or personal loan offer that comes in the mail! Research credit cards that can reduce your interest charges and help pay off your principal.

Practicing responsible credit management takes time and discipline. Though the road to recovery may sometimes seem impossible, getting a good credit score is very attainable. Good credit management comes from living within your means, paying your bills on time, and reducing and organizing your debt.