In today's world, a credit score greatly impacts a person's life. A good score can mean the difference of being able to buy a home or being stuck renting a property while dreaming of home ownership. It can also be difficult to rent a better property without a good credit score. Since many employers use credit scores today to make hiring decisions, having a good score can save a person from being turned down for a coveted job. It is also essential to have a good score when applying for any type of loan. Although it can be disheartening to see an average or poor credit score, there are several easy ways to raise that score and build a better financial future.

1. Keep Credit Card Balances Low

One factor that has a major impact on a credit score is credit card utilization. This is the ratio of available credit to the amount of credit used. As a rule, it is best to keep utilization at about 30 percent or less. Many people mistakenly believe that charging a large purchase and paying it off right away will prevent this. However, credit card companies typically report monthly balances, which means that the purchase will likely be reported as the monthly balance even if it is paid off quickly. One way to remedy this is to work with credit card companies that will accept multiple payments during one billing cycle. Pay the amount off in several small payments during the month to keep the reported balance down.

2. Leave Positive Items On The Report

Thousands of people call credit bureaus each year to have old accounts removed from their reports. As a rule, negative items will automatically disappear from a report after 7 years. If a negative account remains on there longer, contact the credit bureau. However, positive items such as vehicle loans that were paid off or other credit accounts that were paid as agreed should be left on the report. Since these are positive and impact a credit score in a good way, never fight to have them removed.

3. Transfer Nuisance Balances

It is better to have one balance to pay down rather than several balances. Many people struggle to pay down their monthly balances on multiple credit cards, which usually have high individual interest rates. It is best to find a credit card with a low interest rate or a card with an introductory period featuring no interest on balance transfers. Transfer all of the nuisance balances to the new card, and diligently work on paying down the total.

4. Pay All Bills On Time

How a person pays his or her bills greatly impacts a credit score. People who make a habit of paying bills beyond the point when they are past due will notice a drop in their credit score. Paying all bills on time for a year can greatly improve a score for a person who normally struggles to pay them on time. Most lenders and creditors report monthly payment data to the major credit reporting bureaus whether it is positive or negative.

5. Limit Credit Inquiries

When creditors make decisions for revolving accounts or loans, they either use a soft or hard inquiry. A soft inquiry means that limited information is sought. Store cards typically use these. Hard inquiries are made by home or auto lenders in most cases. These involve more information such as an entire credit history instead of a simple score. It takes longer for hard inquiries to disappear from a report, and every inquiry can lower a credit score. A large amount of soft or hard inquires will lower a score and be a red flag to other creditors. For this reason, it is best to limit the amount of applications sent out for various credit accounts.

6. Diversify Account Types

Although it is prudent to limit the amount of open accounts, it is good to have several different types of credit accounts. Having too many of one type of account can lower a score. For example, a person with several credit cards and store charge cards would likely have a lower score than a person who has an auto loan, a mortgage, a student loan and two credit cards.

7. Pay Off Negative Items

Many people experience credit problems and have past-due accounts because they lose their jobs or go through major financial emergencies. If possible, look for ways to cut some unnecessary monthly expenses. Save the money to pay off outstanding negative items on a credit report. If it is not possible to pay the full amount, contact the creditor to work out a settlement. However, make sure the creditor agrees to list the item as "paid as agreed," and get that agreement in writing via fax or mail before setting up any auto-pay deductions or making a payment toward the account. Paying off old debts or turning negative items into more positive ones helps raise a credit score over time.

8. Monitor Score Changes

It is important to monitor a credit score carefully. Every person is entitled to a free annual credit report and can request a free score by mail. The only place to receive an annual report that is completely free is at Credit Karma also allows people to monitor their score for free. However, information is limited. For those who want to keep a high credit score, credit monitoring programs may be a good investment.

Some companies help people improve their credit score drastically in a matter of months by employing aggressive tactics. These services come with a price but can be worthwhile for people who want to buy a home or a vehicle soon. Always research any company claiming to improve a credit score quickly before paying a service fee. With careful score monitoring and smart financial decisions, maintaining a high score is an achievable goal.