Small actions can produce big outcomes when it comes to raising your credit score, and a little common sense goes a long way. 

Your credit score not only impacts the interest rates you’ll pay for Credit Cards, but also the rates you’ll pay for other types of Loans. Interest rates are currently at record lows, but you won’t be able to take advantage of them if your credit is weak, potentially costing you a great deal of money now and in the future.

The good news is that small actions can produce big outcomes when it comes to raising your credit score. The two most significant factors in determining credit score are: how much money you owe, and payment history. In fact, these two factors currently account for 65% of your score.

The first simple thing you need to do is know your credit score (scanning your credit report for errors and inconsistencies), and familiarize yourself with how the score is calculated. Then set a goal for yourself: in 12 months, what would you like your credit score to be? Moving from a score of 625 (generally considered “poor” credit, assigned to risky borrowers) to a score of 725 (generally considered “very good” credit) may not be possible for everyone, but set your goals high! And remember, improvements will not happen overnight; most negative remarks will remain on your Credit Report for seven years (this includes any accounts that may have gone into collections and been paid off, or otherwise resolved). While you can expect your score to increase 30 or 40 points in the first six months of on-time payments, how much your score improves is also determined by how much those balances decrease. (Note: It is relatively easy to keep an eye on real-time fluctuations in your credit score. Many of the largest credit scoring companies offer credit monitoring services. They notify you of any changes to your score, as well as detailed explanations of the causes for these changes. Most of these credit monitoring services are fee-based, usually around $15/month.)

As such, the next simple thing you should do is to set up automatic payments for all of your bills (in order of priority) so you can assure your accounts are paid on/before the due date. As mentioned previously, after a few months of on-time payments your credit score will improve, making you eligible for a decrease in Credit Card interest rates. And regarding these credit cards, make sure that you pay more than the minimum due each month. It does not need to be significantly more, even ten dollars extra a month will help lower that score by demonstrating that you can afford to pay more than the minimum amount.

Additionally, you’ll want to reduce any actions that don’t provide any benefit to you, but will raise your score. For example, try to keep new credit/Loan inquiries to a minimum. And while it is obvious that it looks better to have your debt spread across multiple cards (ideally, each card would retain a balance of less than 30%), when you are just beginning to pay off your cards, use whatever strategy will motivate you to accomplish your goal. For some people, that means paying off the card with the highest balance (and/or interest rates) first, while other people may feel the greatest sense of accomplishment by paying off multiple cards with low balances first. Choose whatever strategy will keep you motivated to get those balances down, and make sure they stay down!

And once you’ve gotten the balances down to zero, don’t close those accounts (and certainly don’t close accounts you’ve had for a long time). Although length of credit only accounts for about 15% of your credit score, don’t undo any of your hard work unless you’ve got a compelling reason to do so.

Finally, continue to monitor balances and transaction history (especially on credit cards with zero balances) to make sure there aren’t any unauthorized charges, and to keep track of any fees the card might accrue while you’re not using it.

Ultimately, there has never been a more suitable time to get your financial house in order. While most of us cannot control whether we will have a job in a year, and we can’t reduce the fluctuations in the Stock Market, lowering our consumer debt is one thing we can certainly work towards. Being financially stable tomorrow depends on our willingness to make financially sound decisions today. This is particularly true in these economic times, and for most of us, getting out of debt now is more important than ever before.