Credit impacts all aspects of life! Credit impacts your car insurance rates, ability to purchase a home or vehicle, and whether you pay a deposit for utilities, cellphones and securing certain jobs. Make no mistake, poor credit costs. For those who are willing, this is a great time to work on your credit and utilize these strategies to your advantage.

The following seven tips will put you on a path to better credit. Let’s go!

1. Pay your bills on time. 35% of your credit score is payment history.
If you know you cannot pay a bill on time, call the creditor and ask if they can give you an extension. What does this mean? Creditors can give you a grace period to regroup and add the payments to the end of your bill. You are still building interest on the loan amount. You will still be responsible for the payments and they will not disappear; however, delayed payment will not have a negative impact on your score. Often, we wait until the last minute to reach out for help or are too embarrassed to contact creditors. There is no shame in having financial difficulties. In fact, each of us will experience some type of life-altering event, whether it’s divorce, bankruptcy, job loss, illness, death, birth of a child; it’s inevitable. These events will happen, but do not have to wreak havoc on your finances and your credit score.

2. Keep your credit card balances at 30% or less of your credit limit. This is referred to as your credit utilization (how much you are using).
If you have a credit limit of $300 and you must carry a balance to the next month, keep the balance at or below $90, which equals 30% of $300. Ideally, it is best to pay your bill in full, but the reality is many people cannot. Understand that if your balance is above 30% of your credit limit and you pay the minimum balance, your score can still decrease. You are above the threshold.

3. Know the difference between your due date and your cycle end date.
There is a difference! As an example, your credit card payment is due on the 21st of every month; however, your cycle close date is the 25th of the month. You paid your bill before the due date, but made some purchases on the 24th of the month. When you reviewed your credit score the next month, your score dropped. You then probably wondered what in the world is going on, especially since you knew you had paid the bill. The creditor added the new balance to the previous balance, which caused your credit limit to exceed the 30% rule (discussed earlier) and guess what . . . your score dropped. These are the smallest of things people do not know, but they will make your score decrease.

4. Check your credit report for errors.
According to the Federal Trade Commission, one out of five Americans have errors on their credit reports. If you have three credit scores (Experian, Equifax, TransUnion), you could potentially have an error on each. If you dispute the errors, by law the incorrect information must be removed by the credit agencies. This is “cha-ching” good news for you because your score will increase once the negative information is removed. You can receive a free copy of your credit report from each bureau annually for free at annualcreditreport.com. As a general rule of thumb, check each report with the above agencies once a quarter. If you would like to check your credit report more frequently, there are several free agencies such as creditkarma.com, quizzle.com and creditsesame.com to obtain “free” credit reports. Checking your credit report frequently can also help to curb identity theft. Also, this is considered a “soft inquiry,” meaning you are requesting your credit score, and this will not impact your score. Some examples of soft inquiries are the pre-approval credit cards you receive in the mail.

5. Become an authorized user.
If you have a family member or a friend that has good payment history on a credit card, ask if they can add you to their credit card as an authorized user. An authorized user allows you to “piggyback” on someone’s great payment history or credit score. This is a great opportunity to build or rebuild a credit score. Understand you are not the primary owner of the card. In turn, if their credit score drops, so will your credit score. However, your credit score will not have an impact on the person who added you to their credit card as an authorized user.

6. Save and build your credit score with Self (formerly known as Self Lender)
Self offers a product that allows clients to secure a certificate of deposit CD and build credit. I have recommended this to many of my clients and they’ve had great results. Apply for the credit builder account and make payments over a period of time (this is your money) which will be drafted from your account. Each monthly draft will report to all three credit bureaus. Next, you will unlock your savings and receive your investment minus fees. It’s a win-win because again not only are you saving, but your credit score will increase as well.

7. Open a secured credit card or secured bank loan to rebuild your credit score.
Several banks, credit unions and credit card companies like Capital One offer secured cards and secured lines of credit to help rebuild and establish credit. These companies want you to have some skin in the game, so to speak. As an example, when I was working to rebuild my score, I applied online to Capital One and found a secured credit card. Capital One pre-approved me for a $200 credit limit, but I had to send $100 to them as collateral. Hence, I had some “skin in the game.” In the event I defaulted on the loan, they had $100 that I invested. It’s a strange dichotomy. We live in a credit-driven society and if you’re not in a position to pay cash for items, you need credit to establish and maintain a good score. (Always remember to use the 30% utilization rule mentioned above.)