Last updated on January 12th, 2016 at 01:16 pm

As a busy Mom, you may not have given much thought to taking care of your credit score, especially if you’re in a position where more money flows out then flows in each month, or if you’re in a position where the money you do receive comes in at a slower rate than your bills each month.

What Exactly Is A Credit Score?

Your credit score is derived by the three major credit bureaus –­­ Experian, Equifax, and TransUnion—on the information recorded on your credit report. This information is the only thing that affects your credit score.

Why It’s Important To Have Good Credit

Here are 5 reasons why it’s important to have a good credit score:

1. It determines how much credit you can receive, including getting approved for a loan.

2. If it is a low score, you will not be able to get credit.

3. If you do have a low score and do get credit, you will fall into a high-­risk category.Consequently, your interest rates will be much higher compared to someone who has a good credit score.

4. If you get a long­-term loan despite low credit score – for instance, for a student loan, car loan, home equity loan, or home mortgage – you will be paying thousands, if not tens of thousands more in interest, than someone else.

5. It may affect your ability to get hired by an employer if any of the work involves dealing with finances. After the financial crisis in 2008, employers run a background and credit check as a way to screen out employees because of so many applicants for any advertised position.

How to Improve Your Credit Score

Fortunately, even if your credit score is lower than you would like, there are some things that you can do. If you have a really poor financial history, you can take steps to remove bad credit by consulting with a credit repair service like Lexington Law.

Also, try these three things to bring your credit score up again:

1. Handle your credit cards in a different way.

If you have been using your credit cards to even out your cash flow, you have fallen into the credit card trap, which is to persuade people to buy more than they earn because the credit card will carry the balance for you.

On the surface of it, credit cards are a way to balance your budget and help you make smart financial decisions. Unfortunately, a credit card makes it easier to spend more money than you earn. You may often believe that this is not a problem because you can then use the money you earn later on to catch up on what you owe. However, the result of this way of using credit cards is that over time, your credit card balance will increase while your ability to pay it off in a timely way will decrease.

The way to handle credit cards is to only put on them what you can afford to pay off when your credit card bill arrives. Avoid paying minimums, pay the full amount, and, above all, avoid paying late. You will not only slash fees and interests, but improve your credit score by showing that you are able to handle a major credit card in a responsible way. Even keeping a low balance of 35 percent of your credit limit is enough to hurt your credit score.

2. Get a loan.

Although this may sound like a counterintuitive way of building up your credit score, this is how it works: paying off a loan on time every time your minimum payment is due will establish your ability to stay on top of debt. If you get a car loan, for example, only buy a car that you can pay off your installments each month without delay. You’ll be surprised to find out after paying off your loan that the next time you apply for a loan, your interest rate is much likely to be noticeably lower. When applying for a loan, get one from your local credit union as they are much more helpful in helping you to bring up your credit scores than banks.

3. Don’t close your credit card accounts.

Again, this is counterintuitive. If having credit accounts in the past, hurt your credit score, it might lead you to believe that you should seal off your lines of credit and forego the convenience of credit cards. Actually, closing your credit cards may damage your credit score, especially if you have a large number of accounts. The trick is to have all your credit card accounts open, but only use a few that you can pay off in full before the due date. Avoid the temptation to rack up charges on all your credit cards, hoping to minimize the overall balance. If having too many credit cards is too big a temptation, then cut up the majority of your credit cards without closing your accounts.

Author

Hey there, I’m Tiffany! I’m a work-at-home mom of two rambunctious children (Jasmine, 9 + Sean II, 5) and recently widowed at just 35 years old. I've remarried and currently live right outside of Baton Rouge in Denham Springs, Louisiana with two adoring cats and a dog. Let's connect on Twitter @fabulousmomblog.

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