The complex world of finance is ever-changing, though there are many aspects that remain the same. Credit scores continue to prove a source of both pride and embarrassment for consumers. In today’s economy, your credit score is a reflection of how well you manage your money, particularly your debt and payments. Credit card companies and banks use credit scores to determine a variety of factors, some of which include interest rates and loan qualifications. When you hold a low credit score, you may be faced with higher interest rates. Landlords may find tenants ineligible for lease if their score is too low. Don’t underestimate the difference between a high score and a low score.

If you do find yourself in a situation where you are overwhelmed by mounting debts, know that there is a way out.

Make Payments on Time

The best way to begin your plan of action is to begin making your payments on time. This is imperative for a good credit score. Payment history accounts for 35% of your total score – a significant representation. Once you are late on your payment, you may be tempted to skip it altogether in hopes of evening it out with double the payment next month. Avoid this. Pay the minimum due as soon as the money is available to you. Missed payments and those 30 days late can drop your credit score.

Check Your Report for Errors

Some of the financial world’s leading consumer reporting agencies offer customers a free copy of their credit report every year. Take advantage of this and find out where you stand. Request a copy and review it meticulously for errors. If you do find any, they must be corrected in haste. Get errors off of your record as soon as possible to see an improvement in your score.

Don’t Borrow Money You Don’t Need

Don’t be blinded by card holder perks. Today, the average American carries five to ten credit cards in their wallet, making temptation all too present. Whilst many stores will offer a discount for opening a credit account, doing so unnecessarily will only prove harmful down the line. You may think it harmless to carry card after card with you at all times, but holding too much credit can make lenders nervous. Avoid the trap.

Call Your Creditors

Certain life events like a job loss or illness in the family may make your monthly payments seem impossible. In this case, contact your creditors right away. Whilst there does exist credit counselling services to aid in negotiating lower interest or payment rates, consumers can avoid the third party and do it themselves. Call your card company and insist on speaking to a manager with the authority to hear your case. Explain that you are having financial troubles. Often, the manager will help you set up a lower payment plan, freeze the interest or perhaps even forgive some debt altogether. Debt recovery agencies like Wescot, based in the UK, can prove imperative in getting your financial affairs back in order. Follow them on Twitter for more about the company’s services. Professional help can be a wonderful resource when you are in over your head in debt.

Pay Off Your Balances

Once you’ve done all you can to negotiate suitable payment plans for your accounts, you must begin the arduous process of paying off your debts in their entirety. Pay off what you owe, sending in as much as you can to the card with the highest interest rate. Proceed by making the minimum payments on your other accounts. Boasting a zero balance on your credit card bills makes you much more creditworthy to lenders.

Start Carrying Cash

Whilst it is indeed tempting to avoid the ATM line at all costs, doing so can prove harmful to your bank account in the long run. Constantly failing to carry cash on your person opens the door for abuse of your credit card. Swiping your card at the check-out is much simpler than watching your hard-earned cash fly out of your hand. A wonderful way to cut down on debt is to avoid using credit altogether until you find a solution that works well for you. If it’s a self-control issue you are facing, consider storing your credit cards in a place where they are not easily reachable. Drastic? Yes, but sometimes necessary in our world of accumulating debt. Whilst you may be tempted to close out your accounts once they are paid, avoid this. Closing an account with which you hold a good payment history can do more harm than good. Simply cut up the card instead.

Create A Budget

Creating a budget for yourself is the single best thing you can do to keep yourself out of debt for good. The first step is to determine your total income, and next you determine your expenses. Once you’ve estimated your living expenses, you can then begin to chip away at the things that in hindsight aren’t so important. From cutting down on monthly trips to the salon to choosing a less expensive cell phone plan, there are myriad ways to trim your costs when attempting to clean up your financial act. A poor credit rating opens the door to a host of financial troubles, including high interest rates and the inability to secure low-cost loans. Adhere to your budget at all costs to ensure your future financial success.