It makes sense to have your credit in the healthiest possible condition when you go looking for a loan. Here are some tips to help you polish up your credit score and possibly lower your interest rate:

1. Pay all bills on time! Late payments really impact your score, and that hit can last awhile. If you are a “frequent forgetter,” set yourself up for automatic bill pay and never be late again.
2. Have a good mix of credit. Having installment credit (mortgage, auto or student loans) mixed with revolving credit (credit cards) demonstrates your ability to handle both kinds of credit responsibly.
3. Stay below 30% of available credit. This is called your “balance-to-limit ratio” or your “utilization rate,” and it’s the difference between the amount of credit you have available and the amount you’ve used. For example, if you have one credit card with a limit of $1,000, it’s best if you don’t charge more than $300—that’s a 30% utilization rate. Even better, don’t charge more than $100. The lower the ratio, the better, as far as your credit score is concerned.
4. Don’t close “old” credit cards, particularly if you’ve kept current on payments and you’ve had the card awhile. The length of your credit history matters, so those “old” cards can be valuable. You might want to put small charges on these cards (and pay them off immediately) so the card issuer doesn’t close the account.
5. Don’t open a bunch of credit cards to get a higher utilization rate. Having too much available credit can make you look risky, especially if you get a whole lot of credit at once—it might look as if you’re stockpiling credit in advance of expected trouble.
6. Check your credit history! You can get a free copy of your history from each of the major reporters (Equifax, TransUnion and Experian) once a year at annualcreditreport.com. Check for errors and report them to the agency immediately for correction.
7. Be cautious of businesses that claim to give you a “free” credit history, but which may charge your credit card a subscription fee for credit tracking or other costly programs.

If your credit history is non-existent or tarnished enough that you find it difficult to get credit, there are ways to begin rebuilding. First and foremost, pay all bills on time, no matter who the bills are going to. Even your cell phone company reports to the credit agencies!

Second, consider a secured card—these are credit cards secured by money you keep on deposit with the card issuer. You can usually charge up to the amount you have on deposit. As you demonstrate responsible behavior, the limit will generally increase until you are able to get an unsecured credit card. These cards are reported to the credit agencies, so your stellar behavior will help you begin building or rebuilding a solid credit history and a great rate-earning credit score!

Article courtesy of Salal Credit Union. All Salal loans and accounts are subject to approval. This credit union is federally insured by the National Credit Union Administration.