How to Protect and Improve Your Credit Score

It seems pretty unfair that our entire financial future is basically determined by one 3 digit number. Your credit score can impact a lot of important things in life: buying or renting a home, obtaining a certain job, qualifying for loans, etc. So how essential is it to have a high credit score, and how do you improve it once you've found out what it is? Take a look at some tips from DebtRecources.org:

• Understand Good Debt and Avoid Bad Debt:  were you aware that "good" debt actually exists? Three things that could fall under this category are obtaining an education, purchasing a house and investing in a business that makes you money. Purchasing an asset that will eventually make you money is an okay reason to affect your credit score negatively, if only initially. Most other things fall under the category of bad debt, and Debt Resources suggests that you pay cash.
  
  
• How Your Credit Score is Determined and What to do About it:  Your credit score is determined by 5 categories: 35% of your score is measured by your ability to pay bills on time; 30% is based on the total balance on each credit card and loan compared to total credit limit (lower the better); 15% for length of credit history (longer the better); 10% for new accounts opened, credit inquiries, or applications for credit; 10% for mix of and types of cards and loans. Knowing this information clearly suggests you should: pay your bills on time, make every payment, never use more than about 25% of your available credit, keep credit accounts open, limit new credit inquiries and applications, and ensure you have various types of cards, loans, and lines.
  
  
• Increase Your Available Credit Limits...Often:  every six months, you should call your creditors to increase your available credit limits if you can. You shouldn't do this so that you'll spend more, but rather to increase your credit availability which lowers your debt-to-credit ratio. This simple act improves your credit score.