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Credit or "financial trustworthiness" is the most important factor lenders consider when you apply to borrow money. A good credit score can actually
help you get better terms and lower interest rates as many lenders offer
better terms and lower interest rates to consumers with good credit ratings.
Know the basics now and start increasing your credit score!



Instructions
Step
1
Avoid going over your limit and control spending on your credit card.
A good guideline is never to borrow more than 20% of your annual after-tax income. Credit analyst know the average percentage of your annual income that you can safely allocate for debt payment and they will give you more points if you stay within the safe side.
Step
2
Never let your monthly debt payments exceed 10% of your monthly net income. This is a safe figure that comes from a good budget. Creditors want you to have enough allowance just in case you exceed the regular household budget. They will give you more points if they know that you are more likely to have more "elbow room" to maneuver your budget.



Step
3
If you use a credit card, pay your bill on time. You get points by paying at least the minimum amount due by the due date, you avoid a late fee and you prevent possible damage to your credit record. Making this a habit can do wonders for your credit score!
Step
4
Avoid applying for credit. Applications you make for credit cards, store cards, and catalogs etc. will actually lower your credit score. They show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. Apply for and open new credit accounts only as needed and don't open accounts just to have a better credit mix.


Step 5

Don't close unused credit cards as a short-term strategy to raise your score. Closing credit card accounts do not give you positive points in the credit score equation. Creditors simply don't view it as a good sign of financial stability. Closing an account doesn't make it go away, it will still show up on your credit report and it would be better to use the credit you already have to prove your ongoing capacity to manage credit wisely and responsibly.