Why is your credit score so important?
The higher score, the less you pay in annual interest rate and, typically, for auto insurance. The score affects a lot of aspects of your daily life.
If your credit has been hurt in the past, then you need to repair your credit history before you see your credit score rise. Improving a bad credit can be worth a lot. There is, however, no quick way to fix a bad history. It takes time. You must manage you credit responsibly for several years.
The first thing that you must do is to check your credit report. If you have not done so already, request a free copy of your credit report and check it for errors. Late payments are always a red flag. Are there any late payments incorrectly listed on your report? Are the amounts owed for each of your open accounts correct? If you see any errors, dispute them immediately.
Late payments have a negative impact on your score.
Using your credit to the limit will also affect your score. There should always be a gap between your credit limits and the amounts you owe.
A good strategy is to pay down the credits that are closest to their limits. This is perhaps easier said than done, but reducing the amount that you owe will have a big impact on your score. Then, keep your balances below one-third of the credit limit.
Do you have too many credit cards?
The more credit cards you have and actively use, the harder it is to keep track of your payments. At one point you might miss a payment, even if it is just a couple of days late. This may really hurt your score.
Do not apply for a new credit card just to pay off debts, or as a short-term strategy to raise your score. You should open new accounts responsibly and over time. You should also keep track and pay them off on time.
This will help your credit score in the long-term.
You should also be careful when closing accounts. Keep old credit cards. Closing out old credit cards shortens your credit history. Closing out a card with high credit limit can also be a bad idea. This will decrease your total available credit. And, never close a credit card that still has a balance.