Credit scores matter when it's time to apply for a mortgage or qualify for low interest rates on credit cards. Your credit score can also make or break your chances of getting certain jobs or even renting an apartment.
So what can you do to boost that three digit number?
- Pay down debt: If you are up to your eyeballs in debt you must put together your own personal bailout plan. The lower your balance on credit cards and other revolving debt, the more your score improves. Having too high of a debt-to-income ratio can knock your score down. Focus on paying off debt instead of moving it from credit card to credit card
- Pay bills on time, every month: Becoming delinquent on accounts results not only in fees or interest rate hikes, but depresses your credit score. For example, FICO told MSN Money that someone with a 680 FICO score, who is 30 days late with a payment, would see their score drop 60 to 80 points
- Open checking and savings accounts: Maintaining savings and checking accounts responsibly doesn't directly affect your credit score, but it can show lenders that you know how to manage money
- Do not open new credit lines: Having too much credit available makes creditors nervous and they might start closing your accounts or lowering credit limits
- Keep old accounts open: Even if your goal is to get out of debt, keeping accounts open that have been paid off can help your credit score. That's because the length of your credit history is factored in when determining your credit score. Even if you've had problems with credit in the past, that won't matter so much as demonstrating that you can handle credit wisely. However, if you feel that you will be tempted to run up too much debt on open credit lines, you're probably better off closing them once you hit a zero balance
- Keep credit accounts out of collections: If you're having trouble paying monthly bills, contact creditors as soon as possible to work out some kind of payment plan
- Review your credit report to fix mistakes: Look for items on your credit report that are out of date, such as bankruptcies that are over 10 years old, and have them removed from your report. For instance, according to MSN Money, a person with a 780 FICO score who files for bankruptcy may see their credit score drop 220 to 240 points
- Get help from a credit counselor: There are many nonprofit credit counseling agencies that can work with you for free or for a low fee. Reputable counselors can help put together a budget, work out a debt reduction plan, and provide you with tips to manage your money better. Working with a counselor does not have a negative impact on your credit score
Lifting your credit score can help you qualify for the best credit card and mortgage rates. A good score can also help you qualify for lower insurance premiums. Even if you don't have great credit there's time to improve your situation. You just need to make smart choices about opening and using credit lines.