Your credit report can affect whether you will get a loan, the terms of the loan, your homeowner and auto insurance rates. It is used by employers to make hiring decisions and by landlords to decide if they will rent to you.
The most important factor in determining your credit score (35%) is whether you’ve paid your bills on time. Consider having automatic payments made so that you don’t inadvertently forget a payment.
Keep your credit balances low. Credit utilization is the second most important factor (30%). It is a ratio of your credit balance on each account to its credit limit as well as the overall credit use among all accounts to your total available credit. This means that you don’t want to max out any one card, while leaving another card unused as a spare, for example. Keep the balance on each card at about 25% or less.
The credit score is important when you will be applying for a loan. If it is not in a good place at the moment, start working on it now. It likely didn’t get there overnight, and it won’t magically improve overnight either.
See the following resources for additional information on improving a credit report: