Your credit is becoming more and more important. Sure, there are some renegade personal finance articles out there that say that you really don’t need credit anymore, since you can buy just about everything in cash. However, there are some opportunity costs that you really need to be aware of. You’re going to need to come to a point where you make credit work for you. This is the system that we have, and it’s highly unlikely that this is a system that’s going to go away any time soon. So this means that you’re going to really have to focus on just about everything in order to really make sure that everything flows as smoothly as possible. If you’re not careful, you could end up missing out on your financial goals.

For example, what if you really want to own a home? Yes, you don’t have to seek out hard money (like mortgages) in order to get a home. However, these alternative sources of mortgage funding can really create other problems. Unless you meet certain conditions, you might not be able to get that. Many people try to go with getting a land contract deal, which usually benefits the owner/landlord and not you — you legally have to pay rent, but you’re still responsible for all of the repairs. However, if you fail a payment you’re going to have to pay up everything that was owed in the first place. Definitely not as protective as a mortgage. At least you know that you have certain rights to the home, unlike what is happening with a land contract.

So you just need to make sure that you focus on the bigger picture here — your credit score really does matter. However, what actually influences your credit score in the first place? That’s what we’re going to actually help you figure out!

You see, the first thing that influences your score is whether or not you actually pay your bills on time. You want to make sure that you always try to pay all of your bills on time as much as possible. Lenders know that someone that pays their bills on time is a lot less likely to default than someone that constantly pays their bills late. That’s why there are so many different penalties involved when you don’t pay your bills on time. Creditors notice, and it’s harder for you to get better credit products at better terms. Once your interest rate spikes upward, it can take a lot of good months of paying your bills on time to lower them back down.

Don’t forget that you’re also going to want to make sure that you also keep your balances low. The overall utilization of your credit is what influences your credit score.

Let’s say that you have a total of $10,000 across the board in total credit. Sounds good, right? Not if you have $9,000 in credit charges! That means that you’re using 90% of your total credit. That high percentage of utilization means that you’re pretty close to being maxed out, and you might even be maxed on several cards.

This is not a good situation, and it means that you need to keep from charging to any of your credit cards and focus on becoming debt free. However, you don’t want to cancel any of your cards like some people do — the age of your credit really does make a difference in terms of your credit score.

Getting out of debt and fixing your bad credit situation can take time, but it’s always worth doing in the long run — check it out today for yourself!