People with good credit can reap the benefits of buying a new car and a new home with very low interest rates. And, it is relatively easy for these same people to be approved for a new credit card when it is needed. People with good credit are usually the ones that automatically qualify for the lowest monthly insurance rates. All of these things and more are some of the most commonly known benefits of having a good credit score today.

On the other hand, if you have bad credit, you may not be approved for a new car or used car loan when you need it most. In fact, in some cases, a bad credit score may even keep you from getting a loan to buy new appliances when your old appliances are breaking down. Whatever the case or situation, you need to look for the most effective ways to improve your credit today.

So, for those of you who fall into the latter category, here are 5 tips that will help you forget the bad credit.

1. Continuously Monitor Your Credit

First of all, one of the essential keys to improving your credit score is to monitor your credit history regularly. In fact, there are many different reasons for keeping tabs on what is happening with your credit history and credit score in the background.

In addition to checking your credit report for incidents of identity theft, you will also have a chance to see what types of activities cause your credit score to go up and down. For instance, if you make a lot of costly charges on your credit card during the month, your credit score may take a huge dive. To prevent this from happening, these charges may need to be paid off in full before the payment becomes due.

On the flipside, when you monitor your score regularly, you can proactively take specific measures that will improve your credit score drastically, too. For instance, if you pay off one of your credit cards, you will automatically reduce your credit utilization. And, when this part of the score gets low enough, your credit score rating may go up from 650 – 700. When this type of change happens, you can go from a poor rating to a good rating.

• Build a Positive Payment History

Now that you have a basic idea of how credit scores can fluctuate up and down, you can use the knowledge that you have acquired to build a good credit history. To improve your score, you need to pay close attention to the timing of how you are paying your bills. For instance, if you are not paying your bills on time every month, you need to make specific changes to positively impact your credit score. In order to build this positive payment history, it is important that you pay all of your bills on or before the due date. In case you don’t have the full amount on time, you can always take advantage of loans for people with bad credit and cover your monthly bill.

• Understand Your Credit Card Bill

Another significant part of correcting a bad credit score is to learn how your credit card transactions are affecting your credit score. Because the 3 major credit bureaus (Experian, Equifax, and Transunion) are factoring in specific activities on your credit card, you need to take full control of what is actually happening.

As mentioned before, the credit bureaus are tracking when your credit card bills are being paid each month. Therefore, the total amounts of these payments can also impact your score as well. For instance, when you only pay the minimum amount on your bill each month and not the full amount, your credit score can easily drop for a number of different reasons. Therefore, you need to understand your credit card bill and how it impacts your credit score.

•  Keep Your Credit Utilization Low

Improving your credit score may not be as difficult as some people may think. So, there is really nothing left, but to do it. However, once you have reached the target that you have set for yourself, you need to know how to maintain it. If you do not follow the maintenance part of this kind of strategy, your score can easily drop at any time.

With that being said, you need a simple strategy that will protect your credit utilization. Because credit utilization makes up 30% of your credit score, you need to pay close attention to how much you charge up on your credit card each month. For instance, if you have a credit card limit of 1,000 dollars, the remaining balance on your credit card each month cannot be less than $900 (i.e.10% of the balance). If you maintain this percentage, you can keep this part of your credit score at the highest rating.

•  Avoid closing Credit Card Accounts

Before you close a credit card account, you need to make sure that you know the total impact that will have on your credit score. Because each credit card account can factor into how your score is calculated, you need to know if your credit score will take a huge dive. For instance, if the credit account that you want to close makes up a huge sum of your credit utilization, you may want to keep the account open for this purpose only.