10 Ways to Improve Your Credit Score

The impact on your credit report and credit score will be considerable if you're late or skip one or more mortgage payments, however, making late payments on other types of loans or defaulting on any loans will also have a disastrous impact on your credit score that will have an impact for up to seven years.

The benefit to having credit cards is that you can determine how much you spend using them, then decide how much you wish to pay back each month, as long as that amount is equal to or greater than the minimum monthly payment due. This allows you to budget your money and make intelligent decisions, based on your financial situation. Simply paying the minimums on your credit cards will keep those accounts from being late, however, the costs associated with that decision (in terms of fees and interest) will often be significant over time. Plus, this strategy will keep you from greatly reducing or paying off the debt.

One of the worst mistakes you can make, aside from making late mortgage payments, is having an account go to collections. This means that you've neglected to pay your monthly minimums or have skipped payments for several months and the account gets turned over to a collection agency. Once this happens, regardless of whether or not you ultimately make the payments or settle the account, your credit score will be negatively impacted for up to seven years.

Keeping your accounts from going into a collections status is a relatively easy process. If you can't afford to make the full payment due, contact the creditor and try to negotiate an alternative payment schedule. People who get themselves into financial trouble often tend to ignore the problems until they become huge legal problems. Simply by taking a responsible approach, paying what you can and working with your creditors, you can almost always keep your delinquent accounts out of collections, which will protect your credit and save you a fortune.

It's true that your creditors want to be paid in a timely manner. However, most also understand that people sometimes run into financial problems. You'll find that by communicating with your creditors and demonstrating good faith by making at least minimum monthly payments, the creditors will be understanding and try to help keep you from destroying your credit.

The easiest and most straightforward thing you can do to protect your credit report and credit score (or begin repairing it) is simply to pay your bills on time. It's that easy!

Strategy 2: Keep Your Credit Card Balances Low.The fact that you have credit cards impacts your credit score. Likewise, your payment history on those credit card accounts also impacts your score. Another factor that's considered in the calculation of your credit score is your credit card balances. Having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you, even if you make all of your payments on-time and consistently pay more than the minimum due. If you have a $1,000 credit limit on a credit card, ideally, you want to maintain a balance of less than $350, and make timely monthly payments on the balance that are above the required monthly minimums.

Demonstrate (through your credit history) that you're actively reducing your balances, while properly and responsibly utilizing your credit cards. Depending on your personal situation, it could make sense to spread your credit card debt over three, four, or five cards, while keeping your balance on each of them below that 35% of the total credit limit mark, as opposed to maxing out one credit card. If you do this, make timely payments on each card and keep them all in good standing. Managing your credit card debt appropriately will not only keep your score from dropping, it could also give it a boost.