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Do these 5 things if you want to improve your credit score

February 18, 2021. Summarized by summa-bot.

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The current low interest rate environment is great news for borrowers, especially those who have good credit.

But there's a catch: In order to take advantage of these bargain basement rates, you'll need to have a good credit score -- or preferably, a great one.

Lenders use your three-digit credit score to determine whether to loan you money and on what terms.

"A credit score is an indicator of your overall credit health as it relates to how you manage the debt you owe," said Bruce McClary, senior vice president, communications at the National Foundation for Credit Counseling.

If you have a low credit score, you probably can't take full advantage of today's great rates. . .

Find out about your credit history

That's why it's important to know your credit score and regularly check your credit reports.

Your credit reports show your credit history.

Your credit score is made up of five things: payment history, the amount you owe (your credit usage), length of credit history, your mix of different credit types and new credit accounts.

Many credit card issuers offer free credit scores to users, which can help you monitor any potential changes to your report.

Payment history is the largest factor of your credit score, and missed payments can be a drag.

"How much an individual's credit score will drop from a missed payment depends on their unique credit history," said Griffin.

Another big part of calculating your credit score is your credit utilization, which is how much of your available credit you use.

Paying off your debts and making sure your credit card balances are low help keep your overall usage rate low.

Closing a credit card account, even if you've already paid the debt off, could have unintended consequences.

It can hurt your score because it could increase your credit utilization ratio by lowering your available credit.

"You may think you are doing yourself a favor by closing an account when it's paid it off, but you are doing yourself no such favor, it is actually hurting your credit score. "

Becoming an authorized user on someone else's account can help create a positive credit history, but be sure the account holder has a healthy credit history.

There are also ways to get credit for payments not usually factored into reports.

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