Things to Do to Keep Your Free Credit Score Healthy

So you've gotten your free credit score by signing up for one of MyFico's, Equifax's, or TransUnion's packages. With the economic hardship around us, credit reporting agencies are raising the levels of what is considered an ideal credit score. Therefore, you want to raise your free credit score to that point, or beyond it. How do you do it in an economic turndown? Here are a few tips:

Pay off credit balances every month

The less you have to pay in interest on your credit cards, the better. Avoid carrying your credit balance over to the next month by paying it off in full before the due date. Credit card companies are likely to raise your interest rates too if you pay off just the minimum, charge too much on your card, or max it out. If you can't afford to pay in full, pay an amount above the minimum -- as much as you can afford. Periodically check your free credit score to see how your payments will affect your score.

Schedule your purchases

To avoid overspending, schedule your purchases and don't buy everything all at once, especially big ticket items. Make your purchases months apart, and make sure you'll be able to pay for them. The key is to have as little debt as possible, at any time. You'll find that judicious spending will improve your free credit score.

Maintain an emergency fund

Set aside a fixed amount of your salary each month and deposit that in an interest earning account. Set up an automatic transfer so that the money gets deducted from your paycheck immediately, before you get tempted to spend it. Throw in any tax refunds, dividends, or any extra cash you have.

This will be your "last resort" source of money, to be used for major medical bills, if you lose your job, or for unexpected emergencies such as a major car breakdown.

Saving is difficult when you're currently paying off credit card and other debts, but eventually it will become a habit and a mindset. The amount of money you have in your accounts will not affect your free credit score, but the fund will be a godsend if you ever come across unexpected emergencies.

Have adequate insurance

Health insurance may be expensive and difficult to get, but this will come in handy in case of a major illness or accident. If you don't have an insurance plan, get one -- for yourself and your family. Take advantage of your company's insurance package if they have one. In evaluating plans, ask about the "lifetime cap" -- the limit on how much the insurer will pay out in total. Look for a cap of $1 million or more. Also consider getting disability insurance, in the event that you become disabled and are unable to work.

Because your free credit score affects all your financial decisions and your eligibility for credit, it is important that you maintain a good score at all times. You can read more about free credit scores on our website, and find simple, practical ways to improve your free credit score. You'll find a wealth of articles on credit and personal finance that will help you get through the economic crisis.