Managing Your Credit Score

Your credit score plays a big role in determining your ability to make major purchases, like buying a car or even purchasing a home. In order to get approved for certain loans or even to be hired by many employers, you must have a high or moderately high credit score, also known as a FICO score. This score is proof that you're capable of being responsible when it comes to your personal finances and that you're able to repay your debts in a timely manner. Whether you are new to the concept of using credit or you'd just like to know how to improve your existing score, taking some positive action can help you get the things you want and need.

Building Up Your Score

If you're new to having credit, there are some things you can do to help get the numbers higher. Open a credit card or two, if possible, and charge a small amount every month. Then, repay the total balance in full when you receive your statement. This shows creditors that you can handle having open accounts and are able to pay what you owe back in a timely fashion. Having these cards can make you feel like you're getting access to "free money," so try to resist the temptation to overspend. Use the card to buy things like groceries, something you would normally budget for out of your disposable income. Then pay it back in full each month and you'll be well on your way to building a positive credit rating. Leave all of your accounts open, since the length of time you have available credit will help push your score upward.

Maintaining a Good Credit Score

If you've been using credit for a while and want to keep the numbers up, it's important to remain vigilant with your payments. Pay at least the minimum payment every month and more than the minimum amount due if possible. If you find that you're paying a high interest rate, compare a few available credit cards and try to open a new account with a lower interest rate. Transfer the balance to the lower-rate card and you'll help save money and be able to pay it off much more quickly. Check your report often to make sure that it's correct and that there are no negative items showing. If you see something that is inaccurate, get it cleared up and corrected right away with a phone call to the credit reporting agency. Try not to use your available credit to make large purchases unless you can pay them back quickly. Having too much debt compared to your available credit can be detrimental to your score.

Improving a Bad Score

Sometimes, costly emergencies happen that can force people to use their credit card when they weren't planning to. Overuse of these cards can impact your score as the debt ratio increases in comparison to the available credit. In some cases, taking a personal loan from your bank can help you pay the cards down and get your numbers back to a good level. Be sure you compare rates of any loans you take to ensure you're getting a good deal. Paying down your debt as quickly as possible is the best way to get your score to improve, so include repayment of your debts in your budget and make this a priority. It may be tempting to open new accounts, but if you have a low score, do not apply for extra credit until you can pay off the amount already owed. Cut your cards in half or freeze them in a block of ice so you don't use them when you don't need to. With some vigilance and time to work toward paying down your debt, you will see your score get better over time.