How to Manage Your Credit Wisely

Consumer credit scores affect nearly every aspect of life - sometimes, in areas we don't even think about. Whether we're buying a home or a car, are applying for a credit card or are looking into a new auto-insurance policy, our personal credit history will play a direct impact on the decisions made by banks, merchants and insurance companies. For consumers exploring the options related to debt reduction, their credit scores have particular importance.

As you look into the prospects of debt consolidation, also think about how your financial decisions will affect you for years to come. If your credit score is suffering, it can be rehabilitated - but it will take time. Keep these tips in mind while you work to repair your debts, and your credit.

• Aim for 700 or more: You want to have a credit score of at least 700 - ideally, 750 or higher. Credit scores range from 350 to 800. The higher your score, the more likely you are to be approved for loans, credit and preferable interest rates. If your score falls into the low 600s, you will be characterized as "subprime," which means it will be extremely difficult to receive credit and loans - and when you do, it will cost you more. Get your credit report, and see where your score is today.

• Pay your bills on time, always: Did you know that 35 percent of your credit score is directly tied to your payment history? It's true. That means that, if you simply pay your bills by their due date, your credit will benefit. If you have trouble making payments on time, you might want to consider setting up automatic deductions from your checking account or e-mail reminders. If you encounter a month when money is tight and you fear you can't make a payment, don't ignore the situation. Instead, call your creditor and find out if you can make a short-term arrangement that will keep your account in good standing and won't adversely affect your credit.
• Be boring: Banks don't like excitement. Creditors frown on surprises. So if you want to have a better credit report, it's your job to be the most boring consumer on the planet. And how do you do that? Well, you keep your accounts open, forever. You ignore the voice in your head that wants a new credit card at a local department store. And you pay all your bills on time. Your credit score is essentially a measurement of how risky you are - and banks think that boring, predictable people are low-risk. This is one area of your life where being innovative can hurt you.
• Get smart: Be the director of your financial life - not the banks, not the lenders. Order a copy of your credit report each year. Be a smart shopper, and get competitive quotes whenever you can - whether it's for your consolidation loan, auto insurance or mortgage. Shop around, save money, and value the money you've earned.