by Debby Dyess

Created on: September 02, 2008

Credit seems to run the country, and credit scores run your ability to receive good interest rates on loans and credit cards. They may also determine employment and the home or apartment you are allowed to rent or lease. If you want financial freedom it doesn't just take a good job; it takes a good credit score.

A low credit score may not be a reflection of poor credit, but of a lack thereof. Build credit carefully; it's the foundation you will work with for the rest of your life. Take out utilities in your name, and pay them on time. Apply for a small personal loan at your bank. Even if you only put the money in a savings account to ensure prompt repayment, the transaction will be reported to the credit bureaus as a consistent, positive payment history.

Credit scores can be adversely affected by may things. One major issue is erroneous information on reports. Checking your credit reports once a year will ensure that the negative credit indicated on the report is actually yours. If it is not, or if the information is old or outdated, contact the credit reporting agency to correct the problem immediately. Americans can legally receive one free credit report yearly, without paying for a membership to a credit reporting organization. This will also eliminate the risk of identity theft and its consequences.

We all know that nonpayment of debt will ruin our credit rating. Late payments on cards, utilities or loans are also turned over to the three major credit reporting agencies. Late payments indicate financial difficulty, and this will lower your credit score.

Maxed credit cards are also a problem for your credit rating. Running a credit card too high is an indication of money problems, and give you more than just an over-the-limit fee; they'll also give you negative points on you credit score.

"Lending" someone your credit can also hurt you. Co-signing a loan for a friend or family member may seem like the nice thing to do, but careful; if they default on the loan it is yours to pay. Their late payments will lower your credit score. Consider not just your relationship with the person, but also their financial history and responsibility before entering into such an agreement. Stay on top of them to make sure that their finances do not affect your credit rating.

Owning too many credit cards, or taking out a credit card and canceling it immediately adversely affects your credit rating. Lenders like to see steady, consistent growth in credit and in payments made. Too much jumping around in the credit card realm is a poor reflection on you, and will be mirrored in your credit history.

Higher credit ratings pay dividends in your life, and are worth the effort they take. Make timely, consistent payments on all debt, maintain a reasonable number of credit cards and manage them carefully, and guard your credit by making annual checks of the information on your credit report. By learning to manage your income and credit, you will have a fuller, richer life.

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