5-credit-practices-to-break-in-2016If you’re hoping to boost your credit score this year, then you’ll likely need to break some old habits. Read on to learn how to help fix your credit score to put yourself in the best financial standing possible to purchase the home of your dreams.

1. Understand how credit scoring works

Credit card companies sometimes report your balances at various times throughout the month. Even if you pay off your large credit balance at the end of the month, they might catch you during the middle of the month at the high end of your limit which will make your credit utilization ratio high. This ratio makes up approximately 30% of your score.

2. Look at your whole credit picture

Be sure to look at more than just your score when you order reports. It’s easy to look at a free credit-scoring app with built-in credit alerts, but you aren’t fully tuned in to what is going on with your credit. You may believe your credit score is on target, but there may be some inaccurate information that needs to be reviewed and taken care of.

3. Don’t put your credit on the line for someone else

Co-signing on a loan might seem like an easy way to help out a friend or family member in need. However, if they make late payments or default on the loan altogether you’re the one left on the hook. Make sure you are fully prepared and financially able to take over the payments if the arrangement goes wrong. If you’re not, you can help the friend or family member by finding ways to establish or repair their own credit instead of putting yours on the line.

4. Find ways to use credit instead of avoiding it

It’s easy to want to avoid credit when you hear horror stories about people finding themselves swimming in debt. That isn’t always the answer though. Instead, find responsible ways to establish your credit for future purchases in the healthiest manner possible.

5. Pay careful attention to the fine print

Make sure you fully understand the implications of the possible debt you’re taking on before you do so. You may have the best intentions to pay all balances in full to avoid late payments before you establish a new line of credit, but sometimes it’s not possible. It is essential to fully understand all terms of a loan or credit card clearly, including interest rates and late fees.