Understanding how your credit score is calculated is an important factor in managing your credit. Unfortunately due to the many changes within the credit industry, many old rules no longer apply when making decisions regarding the best way to handle your credit card accounts. This may make it a bit more difficult to predict what actions will hurt or help your credit score. The following tips have been proven to be successful in the past when making credit decisions and most of them still hold true despite changes within the industry.



Keep Older Accounts Active- Your length of history accounts for 15 percent of your credit score. For this reason it is wise to keep your oldest accounts in good standing. If you have an older credit card that has been inactive consider using it for small purchases to ensure the card issuer does not cancel the card. This is a common occurrence presently as credit card companies close older accounts in an effort to reduce their risk of default. Once a credit card account is closed you lose the history associated with that card which can cause your credit score to drop.

Use Credit Responsibly- Credit cards can prove invaluable when used correctly. Avoid running up large balances which not only increase your risk of having more debt than you can manage but also increases your debt-to-credit ratio. Many consumers are concerned with increasing interest rates, however by charging only what you can afford to pay off each month you can eliminate interest charges.

Take Advantage Of Free Credit Reports- Over half of respondents in a recent financial literacy survey reported they have not reviewed their credit report in the last twelve months. Your credit report contains information used by lenders to determine your credit worthiness. In addition to lenders, employers, landlords and other agencies can view your report when making decisions regarding other areas of personal finance. If you are not reviewing your report you have no idea what information they are seeing, information that is sometimes inaccurate. Order a copy of your credit report and check it carefully to ensure the information listed is accurate. If you spot reports that are not correct you can then take the steps necessary to have the information removed from your report.

Communicate With Card Issuers- It is important to keep the lines of communication open when dealing with the bank that issued your credit card. This may come in handy if you find yourself negotiating a lower interest rate or requesting a late fee be removed from your account. If you have been a long time customer and handled your account responsibly there is a chance your creditor will work with you to help better manage your credit. There are no guarantees in the current economic climate, however you will never know unless you ask.

Play an active role in managing your credit and you will be reap the benefits in many forms. The higher your credit score the better chance you have of securing credit in the future. In addition to securing credit you will generally be offered better interest rates and terms than your peers who have lower credit scores.