How you manage loans impacts your FICO score more than any other factor in your credit history. It’s true, you are scored heavily on the kinds of loans you have, how many months or years you have had those loans, how much you owe, and your repayment history, are key clues that credit bureaus use to arrive at your credit score. If you can wisely manage your loans, you will add points to your credit score quickly. Here are 4 key tips…

1. When the time is right you should try to refinance your high interest loans.

If you have high interest rate loans, especially on big ticket items like a motor vehicle or home mortgage and interest rates drop two points or more in the market, investigate refinancing some or all these loans. This is especially true if your credit score improves to above 700, even above 750 would be better. But, be wise about how you carry out this tactic.

First, shop loan sources other than the creditor that has your loan now. This way you may force your current lender to compete for your continued business by offering a more favorable interest rate. At the same time, do this only with those lenders who are obviously only interested in making money on you. Stick with lenders with whom you have a good long-term relationship but advise them that you are looking for a lower rate on your loan.

When shopping for credit give potential creditors only your credit score, not your Social Security number, for them to come up with a quote. Giving your S.S. number results in inquiries on your credit report which can damage your score. When they use only your score, no inquiries are recorded.

When seeking loans, you are looking for a lower interest rate or better repayment terms or both. By getting a better interest rate you will save hundreds, perhaps thousands, of dollars in interest. At the very least, getting more favorable monthly repayment terms that you can comfortably afford, will enhance your loan repayment history and automatically improve your score.

Refinancing is ideal for someone who is living from pay-to-pay and having a tough time making their monthly bills and who has been getting late notices or collections recorded in their credit history. It’s also a good idea for someone who has been paying bills on time with no recent negatives in their credit history and who has a good credit score. They will have an easier time refinancing for a better interest rate and more favorable repayment terms.

2. This is not my favorite solution but, if you must, there are loans available for folks with a poor credit history.

If your credit score is really low and you need a loan, you should look into services that provide loans to people with poor credit scores. But, be very careful you do not go even deeper into interest rate debt. There are legitimate lenders who know that some folks with poor credit scores will still make their payments on time if given a second chance and they are willing to speak with anyone that other lenders have denied.