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Living credit smart in tough financial times
Credit scores translate the information in your credit report into a simple number. Check your credit report and purchase a credit score so you understand the baseline of where you stand and how your credit may have been affected by recent life events.
While it is important to know where your credit scores fall in the range of risk for lenders, the most important things to understand are the factors in your credit report that determine that risk. Once you understand the way your credit report is affected by your financial behaviors, you will be able to take the necessary steps to improve your credit history and subsequently improve your scores.
Paying your bills on time is the single most important contributor to good credit. Late payments negatively affect your ability to get credit since they indicate a stronger likelihood that you will make late payments again or will be unable to pay your debts in the future. Even if the debt you owe is a small amount, it is crucial that you make payments on time.
If you max out your credit card or charge balances that are very close to your limit, you will increase your “balance to limit ratio,” or utilization ratio. A high utilization ratio may indicate that you are tempted to charge more than you can pay and therefore, negatively affect your credit score.
A credit score reflects credit payment patterns over time, with more emphasis on recent information. The fastest way to see an improvement in your score is to catch up on late payments and pay down your debts. If you have negative information on your credit report, time is your ally in improving your credit score.