Today we are more dependent on our credit scores than we realize. This magic number quite often is the deciding factor in if we can buy a house, car or get that all important student loan. The higher my credit score, the better off I am financially in terms of getting loans. Those with low scores may still get financing but they will be forced to pay much higher rates of interest and charges than those with higher scores.
Those with low credit scores have two choices. The first is to accept their position and pay up for their credit. The second is to do everything they can to raise their score. Your credit rating and score is established over time. If it is low, it didn’t get there over night. Raising it up is going to take some time as well. Keeping your overall debts low will actually help to raise your score.
Some are under the impression that to get the highest possible credit score you need several maxed out accounts and you need to make the monthly minimum payment. This isn’t only untrue it is dangerous. Everything is fine as long as you are paying but if something should happen to change this then you can get into trouble.
In establishing your credit rating, the agencies look at something call credit to debt ratio. If your cards are maxed out or close to their limit then this can lower your scores. You also need to avoid the trap of moving debt from one card to another. This only helps if it is necessary and interest rates are lower. Doing this tells credit companies that you cannot pay your debts. If they see balances moving but not falling then this puts up loads of red flags.
Try to leave accounts open that have 0 balances. It may seem pointless but it can actually help to raise your score. This shows that you can control your spending if you have an open account with a low or 0 balance.
Finally, don’t try opening new account to decrease your debt to limit ratio. This will backfire and have the opposite effect. Better to pay down the debt you have and stay current.
Your credit score is vitally important to your financial future. However, if your score isn’t what it should be, things can change. Pay down debt and get your ratio lower. This will help immensely and lower the overall risk to you.