We all know paying on time is important. But there are other, less obvious best practices.
Of all the numbers attached to you -- Social Security, cellphone, your lucky one -- few are as important as your credit score. A credit score is a numeric summary of your credit history, ranging from 300 to 850, and it gives lenders an idea of whether or not you're a good credit risk.
If your score is 750 or above, the world is your oyster, purchased with a platinum card.
But try to get a loan with a score below 600, and the banks will be tighter with their money than your uncle's pants after Thanksgiving dinner.
And even if you do get the loan, it will not be at the best interest rates.
Five things make up a credit score: Payment history (35%), debt level (30%), length of credit history (15%), diversity of credit accounts (10%) and number of new attempts at getting credit (10%). The key to achieving and maintaining a good credit score is balancing all five.
John Ulzheimer, president of consumer education for Credit.com, and Gail Cunningham, vice president for public relations at the National Foundation for Credit Counseling, can help you master the credit juggling act. They say:
- Pay on time. Late payments are at the top of a slippery slope that leads to collections, judgments and repossessions -- the credit assassins.
- Keep debt low. Just 10% of your credit limit is preferable. If that's not doable, shoot for 50% or less. This is especially important if your credit limits have been cut by card issuers, which can make your account look maxed out.
- Be prudent. Don't take the bait for every card offer you get in the mail or for the discount dangled in front of you at a department store. The more attempts you make to get credit, the lower your score.
- Keep tabs on your credit. A free report is available at annualcreditreport.com. Check for errors or omissions. Report any mistakes immediately. You can buy access to your score at various places, including .
- Don't be hasty. Part of your credit history is showing how long you've been able to manage your credit responsibly, and closing an account shortens that.
- Mix it up. Having a car loan, mortgage and credit cards show you can manage several types of credit at once.