You know you owe quite a bit on various loans and credit cards. You may have sent a payment in late once or twice. No big deal, right? Wrong! Today, more than ever, managing your debts is crucial to having financial stability. The credit markets are tight, meaning if you don’t have practically spotless credit reports, you will have to pay very high interest rates for any new loans. That is, if you even get approved for a loan. Your focus now should be on how to clean up credit reports and boost your credit scores.

Before you can learn how to clean up credit, you need to understand the credit ratings system. There are three credit bureaus that are widely used to evaluate the financial stability of consumers. When you apply for a loan or credit card, one or more of the credit bureaus will be used to check on your credit score. Scores can range from 300 to 850. The higher the score, the more likely you will be approved for the loan or credit card. If you have a low credit score you are deemed to be a more risky customer. When your score is low, you might still be approved for a loan, but the terms of your loan will include a high interest rate.

When you want to figure out how to clean up credit reports, look first to your credit cards. The credit bureaus reward consumers who have long credit histories and a substantial amount of available credit. Try to pay more than the minimum required each month. As difficult as it might be, use cash when making purchases to keep from piling on to your credit card debt. When you keep your balances maxed out, credit scores will continue to stay low, even if you are paying the minimum amount on time.

Don’t think you can beat the system by taking out new credit cards and transferring balances. You risk taking a ding on your credit score by applying for the new cards. What you will find is that while this tactic gives you more available credit, it actually causes your scores to go down. So, as you are learning how to clean up credit, stick with the debts you currently have. Once you get them under control, you will be in a better place to get favorable terms when you really need to get a loan for a new car or a home purchase.