While today's low interest rates make it a great time to borrow money for purchases such as a home, tighter lending requirements mean that only those with high credit scores can qualify for these rates, or in some cases even qualify for a loan at all. If a low credit score is holding you back, these 10 tips will help you get on the right track.

In Pictures: Obtaining Credit In A Bad Economy

  1. Pay on time.
    Prioritize the payment of bills that show up on your credit report and set up an organized bill-paying system so that you won't miss a payment. Paying on time accounts for 35% of your credit score, so this is one of the easiest ways to improve it. (For more tips, see A Procrastinator's Guide To Bill Payment.)

  2. Pay more than the minimum.
    The minimum required monthly payment isn't there to do you any favors - it's there to keep you in debt. Pay as much toward your credit card balance as you can each month, and pay down the cards with the highest interest rates first. Lower balances are better for your credit score.

  3. Prioritize your biggest debts.
    Focus on paying down credit card balances that are higher than 50% of your credit limit. The amounts you owe make up 30% of your credit score, and borrowers who have used up more of their available credit are considered higher risk. (For more insight, see Expert Tips For Cutting Credit Card Debt.)

  4. Negotiate a lower interest rate.
    With a lower interest rate, your pile of existing credit card debt won't grow as much every month, and you'll be able to pay down your balances faster.

  5. Keep your oldest accounts open.
    The length of your credit history is 15% of your score, so even after you've paid down your balances, keep your oldest cards open. If you don't have a balance, use these cards to make occasional purchases (then pay the bills in full), so the card company won't close your account for inactivity. (To learn about what you need to consider in making this decision, read Should You Close Your Credit Card?)

  6. Stop opening new accounts.
    Having lots of recent inquiries on your credit report dings your score temporarily. If you're planning to apply for an important loan in the near future, don't apply for anything else.

  7. Pay for everything in cash.
    If you stop adding to your existing balances, you'll have an easier time paying them off. If cold, hard cash is too tempting for you, just start paying with your debit card, and be careful not to overdraw your account. (Think you can't live without credit? Read Should You Pay In Cash?)

  8. Create a budget.
    If you don't know how much you're earning and spending each month, it's easy to spend too much and accumulate debt. Watching where your money goes will make it easier to pay down your debts and improve your credit.

  9. Avoid cash advances.
    Cash advances generally start accruing interest from the moment you take them out. They also come with fees and high interest rates. Finally, because of the way most credit card agreements are structured, you won't be considered to have paid off your cash advance until your entire balance is paid off, meaning it will probably take you longer to pay off your debt and get it off your credit report.

  10. Correct any errors on your credit report.
    Although the documents can be daunting, it's important to make sure you understand everything on your credit report from each of the three credit bureaus (Equifax, Experian and TransUnion) and to verify that any negative marks are accurate. Any red flags are worth investigating.

The hardest part of getting out of credit card debt and improving your score is being patient; you can have an appreciable effect, but it will take time for you score to reflect your efforts. Following these 10 steps will get you closer to your dream score, but time is also a crucial ingredient, especially if you have late payments, discharged debts, bankruptcy or foreclosure in your past. Unless there are major errors on your credit report that you can easily get erased, there is no quick fix for a bad credit score. Often, it takes at least a couple years to go from a low score to a high one. But don't let the waiting game deter you from taking action - tomorrow will be here before you know it.

Related Articles
  1. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  2. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  3. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  4. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  5. Retirement

    7 Ways to Use a Strong Credit Score During Retirement

    Find out why it is important to maintain a good credit in retirement. Learn seven reasons not to leave your credit score behind when you retire.
  6. Investing

    Amazon Financing Now in the U.K.: Is America Next?

    Amazon has unveiled a great credit product in the U.K. Will America be the next country to have access to this financing option?
  7. Credit & Loans

    Why You Should Use Your Credit Card For Purchases

    Responsible credit card users who always pay off their monthly balances should use their cards to buy everything.
  8. Retirement

    6 Methods to Maintain a Healthy Credit Score During Retirement

    Learn how to improve your credit score during retirement. Your credit score still matters in retirement, and these tips can give it a boost.
  9. Credit & Loans

    The Fed's Interest Rate Rise & Your Credit Cards

    The U.S. Federal Reserve recently raised the lending rate from 0% to 0.25% – the first time since 2006. How does that affect your credit card payments?
  10. Investing News

    Warren Buffett: Be Fearful When Others are Greedy

    It is prudent for the investor to understand when the party has gone on long enough and the clock is about to strike midnight. Be fearful when others are greedy.
RELATED FAQS
  1. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  2. How many free credit reports can you get per year?

    Individuals with valid Social Security numbers are permitted to receive up to three credit reports every 12 months rather ... Read Full Answer >>
  3. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  4. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  5. Is it possible to get a free credit report from Equifax?

    It is possible to get a free credit report from Equifax, as well as the other two major credit bureaus, Experian and TransUnion. ... Read Full Answer >>
  6. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
Trading Center