My last communication addressed the issue of wise debt management. One reason to manage your debt is to make sure your credit score stays high enough for you to obtain the lowest interest rate when you finance your next car or home or refinance your present mortgage. If you did not receive the lowest interest rate possible when you purchased your present home, you may be able to lower your rate significantly with a few easy steps that will raise your credit score in the long run.

A credit score is an index derived from your credit history. It is used by lenders to determine whether you should be approved for a particular loan and the higher the score the greater your alternatives when you need to obtain a loan. The more alternatives available, the greater chance you will achieve a lower rate, larger loan amount, or preferred type of financing instrument such as a fixed rate.

What are these steps that will ensure you raise your score and/or keep it at a higher level? First, make sure you make your payments on time. Any late payments, no matter how minor, can negatively affect your score. Also, keep your amount of approved credit down to a manageable level. Many consumers open scores of credit lines because it is convenient, but even if you do not use these lines, too much credit can hurt your score. If you do not use a credit card, close it. Keep a few lines open so that your score reflects the availability of credit.

It is also important to make sure that you are not applying for credit multiple times on a regular basis. This negative factor has been minimized for those who make several applications in a short period of time before a major purchase–however over the long run many credit applications can adversely affect your score. This is why a simple home equity line of credit can be more advantageous than multiple credit cards.

If you are interested in learning your credit score or obtaining more information about this important topic, there are on-line services that can help such as www.myfico.com. Or, I have access to this information and would be happy to assist you. Just contact me. And if you know anyone who is struggling with their credit and would like to improve their financial situation, I would be happy to help them as well.