Your credit score is one of the most important measures of your financial health because it tells lenders how responsibly you handle your finances.

The factors that contribute to a high credit score include a history of on-time payments; keeping a low balance on your credit cards; a good mixture of different credit cards and loans; older credit accounts; and minimal inquiries for new credit.

Things you do not want to include late or missed payments; high credit card balances; having anything in collections; judgments against you — obviously, all of those things are very bad for your credit.

Here are some tips for improving an ailing credit score:

•Do anything possible to avoid late payments – worst-case scenario, put all your payments on your best credit card and then pay the balance off every month — although, that’s not really the ideal situation. The ideal situation is getting yourself organized enough to treat your household like a small business and pay everything on time.

•Do not procrastinate when dealing with delinquencies! Nobody wants to deal with a headache like that, but delinquencies have a way of coming back from the dead — this time for more money.

•Pay off your credit card balances – it makes you look good. If you can’t do that, just make sure to keep your total balance at 30% or less of your credit limit. The credit agencies call that your “credit utilization balance.” 

•Limit your requests for new credit. There are two types of credit inquiries: soft credit inquiries and hard credit inquiries. Soft inquiries are things like checking on your own credit, giving a potential employer permission to check your credit, or credit card companies that check for pre-approved credit offers. Those are all okay. Hard inquiries adversely affect your credit score. A hard inquiry is when you apply for a new credit card, a mortgage, an auto loan, or other “high-stakes” credit. It alerts the credit agencies that there may be something going on with your financial big picture, and they automatically lower your score as a result.

•Keep the old credit card that you never use. Everybody likes to switch cards because the newer credit cards have better mileage deals, etc. — but don’t close those old accounts just yet. Credit agencies and lenders want to see an older average credit age.

The last and most important thing we recommend is to hire a professional. Judith Heft & Associates will work with you to solve problems head-on — in a way that doesn’t interrupt your lifestyle. You’re not in it alone, and we’re going to develop a long-term financial strategy with you to make sure you always have good credit.

In fact, all of Judith Heft & Associates’ clients have excellent credit. Coincidence? I think not!