You may not think about your credit score unless you apply for a credit card or try to make a major purchase, but it can impact your life on a daily basis. While a recent report noted that credit reporting guidelines changed on July 1st of this year and that it may benefit many people, assuming your credit score is healthy can be a detriment to your overall financial standing. If you discover your score is not all it should be, the good news is that there are several ways to change it for the better.


1.     Understand That Not All Debt Is Bad


You may believe that all debt is negative and that you should take steps to remove as much as possible off your credit report. However, old debt that you handled successfully can have a positive impact on your overall score. Credit card balances that were paid off and closed, paid financed vehicles, and other large debts that have been settled can improve your credit score and establish a more stable history. If you pay off a major debt, you may want to leave it on your credit history rather than requesting that it be removed.


2.     Keep Your Credit Card Balances Low


Revolving credit, which is mainly attached to how many credit accounts you have open, is a major contributor to your credit score. If you have more than one credit card, one way to keep your score healthy is to keep the balances on them low. Charge conservatively, do not impulse buy, and pay off the balances on your card each month, if possible. Try to take advantage of cards with a lower interest rate and avoid department store charge accounts, which usually carry an elevated or inflated annual percentage rate and often charge yearly fees to keep the account open.


3.     Maintain Credit Cards Wisely


You may believe that closing all your credit cards might raise your credit score, but in reality, having revolving credit can actually raise it. This is not to say you should run out and open several new credit cards; instead, you should maintain two or three affordable cards as wisely as possible. Pay the bills on time, try to avoid falling behind on payments, and do not use a cash advance option unless it is absolutely necessary. Over time, paying promptly and using your cards responsibly should help grow a healthy score.


4.     Remain in the Know


Your credit score can change each month, depending on the credit inquiries you make, how much credit you apply for, and how you pay your creditors. As such, and because the risk of identity theft can increase when you apply for credit or shop online, you should monitor your score. There are several smartphone apps that allow you to track your score, or you can order your credit report for free once every twelve months from each of the three main reporting companies: TransUnion, Equifax, and Experian. Financial expert Don Gayhardt offers additional tips for managing your finances on his blog.


5.     Know Your Rights  


If you apply for credit and are turned down, you are within your rights to know why and which credit report the creditor used. Some creditors may send you a letter to explain why you were turned down, but if this isn’t the case, you can contact the company for more information. It is important to remember, however, that not all creditors may gauge your risk in the same way, and that some companies may have more rigid guidelines than others.

Taking care of your credit score can be a vital component of your overall financial health. Whether you have established credit or are working to rebuild or create a solid credit history, tracking and working to improve your score may be of great help to you.