Here’s what you need to do if you want to build a strong credit score:

• Begin building a credit history as early as possible. In other words, don’t wait until you’ve graduated from college to begin worrying about your credit score. Instead, when you turn 18 and are gainfully employed, begin by establishing your credit with a secured credit card or a retail credit card. Make paying those credit cards every month an absolute priority and never, ever miss a payment. Keep your debt to a minimum and you can expect your credit score to begin taking shape rather quickly.
• Pay for purchases with plastic. The only way to really build a strong credit score is to show the credit reporting agencies that you can manage your credit well. And to do that, you need to charge and charge often. Since you are going to be charging purchases, consider a rewards credit card that will pay you back in the form of cash or points for making purchases you would have made anyway. However, it is vital to make paying those cards off each month a priority so you don’t begin to accumulate debt.
• Be careful about having too much credit. Although the only way to begin building a strong credit history is to start spending on credit cards, applying for too many credit cards at one time may raise a red flag with the credit reporting agencies that you are not acting responsibly in terms of your finances. Therefore, keep the cards to a minimum.
• Monitor your credit score on a regular basis. A strong credit score is often dependent upon the accuracy of the information contained in it. Therefore, in order to ensure you are maintaining a strong credit score, it is best to order a copy of your credit report at least once a year to check for any errors or discrepancies.

Although credit card interest rates have been higher than they have throughout the last, few years, it is possible to still score a credit card with a low interest rate – you just have to fight for it.

Here’s how:

• Recent studies have shown that 29 percent of all people who contact their credit card about lowering their interest rate are successful. Although it may not seem like all that much, it begin to sounds much better when you realize that number equals nearly two-thirds.
• Before you begin making phone calls in an attempt to lower your credit card’s interest rate, make sure you are in the position to do so. In other words, if your credit score is strong you will have a much better chance of getting your credit card company to take a moment and listen to your request. If, on the other hand, your credit score isn’t exactly strong, you may want to save yourself the hassle of asking your credit card company to lower your rate.
• Be prepared to flex your muscle. In other words, have a few credit card offers beside you for bargaining power if your credit card company seems unwilling to lower your rate. If you have strong credit and other credit card offers lined up, your creditor may begin to take you more seriously and accommodate your request for a drop in your interest rate.
• If the customer service representative is not receptive to your request, it may pay off to ask to speak to a supervisor. You may have more success talking to a supervisor because they have the authority to make changes a customer service representative may not.
• If all else fails, cancel the card if your credit card company is not willing to accommodate your request. However, before you do this, make sure you have another approved credit card offer wrapped up. Often times, the threat of canceling the card will make the creditor pay more attention to your request.

Wrong!

It may be quite tempting to just give up on your credit, especially if you feel your debts are simply too overwhelming to handle anymore. However, giving up on your credit is never the right decision to make, and here’s why:

• Judgments – Although creditors of unsecured loans such as credit cards and personal loans cannot take away your home, for example, they can take you to court where a judgment against you can be made by a judge. If a creditor wins a judgment against you in court, the court can begin to garnish your wages. Instead, it is best to call your creditor and set up a realistic repayment plan so you can stay on good terms with them. Ignoring the problem will not make it go away; it will simply delay the inevitable.
• Other credit – Your poor credit history can affect you years into the future. In other word, an abandoned credit card today can affect your ability to obtain a home or car loan years down the line. You may have forgotten about your past credit mistakes, but I guarantee you creditors and credit reporting agencies have not.
• Jobs – The job market is tight, and employers are increasingly looking further into their employees’ habits. As a result, it has become more common for employers to look at the credit scores and reports of potential employees. The reason is quite simple: some employers may find a direct correlation between a potential employee’s responsibility and their credit score. A low credit score may raise a red flag with an employer, thereby preventing you from getting that job of your dreams.

If you feel like your credit cards and other loans are simply too much to handle it is best to contact your creditors directly and talk to them about your financial struggles. Most creditors will be willing to work out a more affordable payment plan with you, so it always pays to ask.

• Employers – Your education or ability to do your job may not be the only thing an employer is looking for. In fact, many employers have begun performing credit checks on candidates. They may want to know if you are in debt, if you have any outstanding judgments against you, and if you are able to handle your finances well. And a credit report may be able to answer all of their questions. Because new jobs are harder to come by in today’s economy, employers have begun using interesting methods to narrow down the list of potential candidates, and they may very well use your credit report to do just that.
• Landlords – A home loan isn’t the only time you can expect your credit report to be pulled. Most landlords, in fact, will look at your credit report during the application phase. Landlords must protect themselves from renters who don’t pay their rent, so it is often a smart move to check a potential renter’s credit report.
• Insurer – What many people don’t realize is that their insurance rates are often dependent upon their credit score. From homeowner’s insurance and auto insurance to even renters insurance, rates can vary widely based on an individual’s credit score. In other words, you may be paying much more in insurance rates than someone the same age as you and in the same circumstance as you, simply because your credit score is lower.
• Cell phone carriers – Before you sign an agreement with a cell phone carrier, your credit score will likely be checked. If you don’t have good credit, you could be turned down for a cell phone plan. You may also be unable to qualify for the best plan rates or even pay a deposit.

Your FICO score is determined using a number of factors including: your payment history; the total amount of your debt; the length of your credit history; how much new credit you have; and what type of credit you carry. Although the importance of each of these factors varies a bit, it is known that the amount of debt you have makes up about 30 percent of your FICO score, thereby making it a very important factor to consider.

What to Consider

The amount you owe includes: the number of debts you have; the types of debt you have; and the amount of debt on those accounts. One of the main factors considered when determining this portion of your FICO score is your credit utilization ratio, also commonly referred to as the debt-to-income ratio.

The credit reporting bureaus will also consider the lack of a certain type of loan or the amount of credit you have with revolving lines of credit, such as credit cards. They will also pay close attention to installment loans, as well, such as car loans or mortgages.

Why Debts Matter

Your debt levels matter when it comes your FICO score because creditors will examine the amount of debt you have compared to your income. They will also compare the amount of available credit you have. In other words, if you have three credit cards with a total available credit of $30,000, and you only have $3,000 in debt, you will likely have a high FICO score to reflect this. However, if you have $30,000 and your debt totals $25,000, your available credit will be low, thereby lowering your FICO score.

If you want to maintain a strong FICO score, you will want to pay close attention to the amount of debt you carry at any given time. It is always best to have a variety of loans on your credit score, such as credit cards, home loans or car loans, but it is also best to keep your debts to a minimum.

There are a number of ways to begin establishing a credit score so you can enjoy low rates on everything from credit cards to home loans.

If you are starting from scratch, it is probably best to follow these steps:

• Apply for a secured credit card – We like secured credit cards because individuals with no credit or poor credit can use them to establish a strong credit history. Here’s how a secured credit card works: a secured credit card requires a deposit, which is usually equal to your credit limit. In other words, if you accept a secured credit card with a $500 credit limit you will likely be required to hand over a deposit for $500, as well. The deposit is held by the creditor and only used if you fail to pay on your credit card. If you cancel the card or transfer the card into an unsecured card, you will receive your deposit back, in full. Once you begin establishing a history with the secured credit card company they may either reduce your deposit amount or increase your credit limit. Make sure the company you choose reports your monthly payments to the credit reporting agencies. Some secured credit card companies report only quarterly, so it is important to find a creditor who reports on a monthly basis.
• Apply for a retail credit card – Although retail credit cards are do not come highly recommended by financial experts because of their high interest rates and fees, they are much easier to get for individuals with little to no credit. With that said, you may find that a retail credit card is a good tool for establishing credit. Just be careful and pay off your balance in full, each month, as to avoid costly finance charges.
• Apply for a college credit card – If you are a college student, you may be eligible for one of the many college student credit cards. Most of these cards are designed for individuals with little to no credit history, making them ideal for college students. Be careful, however, as these cards often come with high interest rates.

• Rework your budget – Your budget will, no doubt, look dramatically different when unemployed that it did while you were employed. Once you have ascertained your monthly unemployment compensation and severance package, it is time to rework your budget and account for the loss of income. You may need to cancel your weekly dinner out or cancel your cable to make ends meet, but it is important to make a realistic budget while unemployed so you don’t end up in financial peril while you look for a new job.
• Consider minimum payments – Although most financial planners will tell you to always pay more than the minimum payment on your credit cards, now is not the time to do so. Send in the minimum payment each month until you secure a new job. Although paying just the minimum payment won’t do anything for your balances, it will keep your credit score intact, which is the most important thing to worry about when unemployed.
• Call your creditors – If your budget while unemployed does not permit you to make the full payments on your debts, it is crucial that you contact your creditors before missing any payments. Most creditors are more than willing to work with you to find a resolution, so don’t ignore your financial problems during this time. It is important to note, however, that once you make a new financial payment plan with your creditor you must keep up with your end of the bargain; otherwise, the creditor will not be so kind to work with you in the future. In other words, don’t agree to a payment plan that you cannot realistically afford.

Here’s how to do it:

• Lay all of your credit cards in front of you and add up your total amount of credit card debt. Then, take note of the interest rates on all credit cards. Once you have a total amount, it is time to identify if you possess a credit card with enough credit to accommodate your other debts, as well as a competitive interest rate. If you have a card that fits the bill, contact the creditor and inquire about a balance transfer offer. If the creditor cannot provide you with a good balance transfer offer, it may be time to look elsewhere.
• Head to the Internet and compare the latest balance transfer offers. We like using the Internet to find credit cards with balance transfer offers because many of the websites compare credit cards, side by side, thereby allowing you to better compare their rates and features.
• Pay close attention to the card’s balance transfer offer. Look for the card’s promotional rate, the length of the promotional rate and balance transfer fees. In addition, pay close attention to the interest rate of the credit card once the promotional rate has ended. It is important to note that some balance transfer credit cards offer low promotional rates on balance transfer offers, but don’t extend the rate to purchases. The balance transfer fee is particularly important, as it could add up to hundreds of dollars in fees. For example, if the balance transfer fee is five percent and you transfer $10,000, your balance transfer fee would total $500.
• Look closely at the card’s terms and conditions. Before you accept a credit card offer for a balance transfer, carefully read the card’s fine print. If there’s something you don’t understand, ask! The best way to ensure you are making the best decision regarding a balance transfer is to fully understand the card’s terms and conditions.

Your credit report is more than just a number. In other words, it is important to identify and view a number of things on your credit report so you can be sure you are doing everything you can to ensure a strong credit score.

If you want to be sure your credit report stands up to scrutiny, here’s what to look for:

• Late payments – Any lender or creditor can (and often do) report your late or missed payments to the credit reporting bureaus. And every time one of these reports is made by a creditor, your credit score takes a hit. In fact, by most standards, it appears that late payments can lower your FICO score by as much as 35 percent. It is also important to understand that not all late payments are created equal in the eyes of the credit reporting agencies, so the longer you take to pay and the frequency at which you fail to pay on time will adversely affect your credit score.
• Amount of credit – Although the key to a strong credit score relies on taking on credit, too much credit is never a good thing. Called a debt-to-credit limit ratio, the amount of debt you have in relation to the amount of available credit you have can either help or hurt you in the eyes of creditors and the credit reporting agencies. In short, keep your debt to a minimum so you can be sure creditors will not see you as a credit risk.
• Judgments, Bankruptcies and Liens – Although your credit past plays a big role in your credit report, so do any bankruptcies, liens and judgments.  In other words, any public record against you will likely appear in your credit report, which may negatively affect it.
• Closed accounts – A closed account will have a negative effect on your credit score, at least for a short period of time. This is because your debt-to-available credit will be lowered upon closing an account. If you feel you must close an account, by all means do it; otherwise, avoid closing accounts, especially in the months preceding a loan application.

• Begin by explaining the nuts and bolts of credit. How to get it, what you need to get it, the importance of it, and the many ways in which it helps people. Don’t assume that your teenager understands basic, financial topics. Start from the beginning and encourage him or her to ask many questions.
• Lead by example, and show your teenager how you use credit and the many ways it helps your family achieve goals and manage your household. Show your teenager your credit card bills and explain the notion of interest rates and how a simple purchase can end up costing you much, much more in the long run if you fail to pay it off in a reasonable amount of time.
• Explain to your teenager the many ways he or she can get into deep credit card trouble if the credit is not managed in a responsible fashion. If you know other people who have suffered from credit troubles, explain the story to your teenager. Often times, simply having a real-life situation to refer to will allow your teenager to better understand the consequences of irresponsible spending.
• Allow your teenager to “experiment” with credit card spending by using a prepaid credit card. Allow him or her to understand how to stay on budget and to spend within his or her means.
• If you plan on sending your teenager to college with a credit card, set up very specific spending limits and let him or her know you will be monitoring the spending on the credit card at all times. Because of the changes in the credit card industry since the inception of the CARD Act in 2009, you may find it necessary to co-sign for a credit card for your teenager, so take the time to educate your teenager so he or she fully understands the ins and outs of credit and credit cards.