We are living in an environment where your credit score is one of the mane keys to your financial health. Your credit report is very important,  it functions as the major evaluation tool utilized by most lenders to determine your credit score. It only makes sense to adapt effective credit scoring strategies to ensure that your credit report gives you the highest score possible, doesn't it? It's easer than most may think.

Get your Free Credit Report

One of the key credit scoring strategies you can deploy is to first obtain a free credit report. Each person in the United States is entitled to one free credit report every year, which can be acquired from these three agencies: Trans Union, Experian and Equifax. Give it a thorough run through, paying attention to any negative marks, which may be an error or fraud. Together with documented proof, approach your creditors to eliminate any misreported debt that is interfering with your credit score.

Maintain an excellent payment record

Your payment patterns constitute 35% of your entire credit score. This means that it is essential that you make loan repayments on time. In fact,  missed payment can cause you to lose between 50 and 100 points off your total credit score. Being punctual on your payments is one of the best strategies to raise your credit score.

Reduce the outstanding balance on your credit cards

Another strategy to raise your credit score,  is to reduce your outstanding balances by paying down most of your debt. This based on the fact that your credit score is also determined by the gap between your credit limit and your outstanding balance. Paying off your debt quickly will definitely help raise your credit score.

Let old accounts remain

Although it is our nature to close our old credit accounts which we have paid off, doing so may actually produce a negative effect when it comes to your credit score. This happens as your total available credit is reduced when you close an account, the result is a seemingly larger outstanding credit. For example if you have 10 credit cards each with a limit of $1,000 for a total of $10,000 in open credit, and you are only using $3,000 in credit, your credit ratio would be 70/30. The 70 represents the amount of open credit that you are not using and the 30 represents the amount you are using. Lets say you close 5 of your credit card accounts, because they are already paid off and your not using them. So you now have $5,000 in open credit and you are using $3,000 dollars of it. Your new credit ratio would be 40/60, the 40 represents the amount of unused credit you have and the 60 represents the amount of  credit you have used. By closing your accounts that you paid off, you are closer to your total credit limit.  With this, your credit score will become lower than if you had kept the older accounts active.

Avoid declaring bankruptcy

Declaring Chapter 11 or Chapter 13 may seem like the easy way out of debt for many people. However, from a credit score perspective, this will become detrimental as your score will be reduced by at least 200 points once bankruptcy takes place. Moreover, a bankruptcy history stays within your credit report for at least 10 years, costing you much more in interests when you acquire credit again in the future.

Too much debt, too little debt

While having too much debt is certain to hurt your credit score, having too little debt may result in you being not creditworthy. This stems from the fact that creditors have no basis to determine your credit worthiness. The workaround for this is to establish some sort of debt – student loans or gas credit cards, and ensure that you maintain a healthy payment schedule each month.

Finally, with the right credit score strategy deployed, there will be no reason why your credit score will cannot be improved. In no time at all, you will be enjoying lower interest rates as well as experience ease in obtaining credit from lenders.