Credit Score

it’s important to manage your credit and debt wisely.

Getting your finances in order in 2013 can improve your financial wellness and make it easier to manage your budget. One great way to bolster your finances is to get your credit in tip-top shape. After all, credit is an asset that can best be utilized when you manage it wisely. But when you abuse credit—or mishandle your debt obligations—you can almost certainly expect to take a financial tumble. Fortunately, the experts at Credit Sesame recently offered some useful credit strategies that can prevent you from falling off your own fiscal cliff.

Boost Your Credit Score

If you’re planning on making a major purchase on credit or interested in a financing plan to cover a larger purchase, you’ll need to make sure your credit history is in great shape.

Start by taking the necessary steps to enhance your credit score so that lenders will find you to be an attractive prospect for a loan or credit line.

Simple things like paying down balances on high-interest credit cards, and checking your credit report for errors and correcting them, can help to boost your credit score and make you eligible for better rates on loans and financing packages.

Tip #1: Don’t Close Out Credit Card Accounts

Even if you’ve paid off one or several credit card balances this in 2012 year, don’t make the mistake of closing those accounts in 2013.

Leaving those credit lines open can actually boost your credit score because it increases the amount of available credit you have; this is one of the factors that determines your credit score.

In a nutshell your credit utilization rate matters. That’s the percent of credit you have charged on your cards versus your total credit card limits.

Tip #2: Avoid Taking Out a Home Equity Loan

As tempting as it may be to tap into an equity line of credit to supplement your income and cover some of those extra expenses, it can be difficult to repay that loan within a reasonable amount of time.

Many people who tap into a home equity loan to free up some cash are actually falling into a dangerous cycle of debt accumulation.

It doesn’t take long to mismanage those funds and be back in the position you started in (or worse) with that extra debt load. 

Be more responsible with your finances this year by committing to only spending what you can realistically afford, and not relying on an equity loan to bail you out of a financial crisis.

Tip #3: Review Loan Interest Rates

Consider the benefits of refinancing your home loan or car loan and calculate how much money you will save on those monthly payments over the course of the year. For some people, the savings can be enough to free up cash that can be used to pay down credit card debt, student loans, or just cover some of those extra expenses.

And remember, a good credit rating will do more than get you low-interest rate credit cards and loans. It will also help lower your car insurance rates, as well as keep you in a good financial position if you want to seek a new job or a promotion at your existing place of work.

Those are all great reasons to put improving your credit at the top of your to-do list for 2013.

This article originally appeared on AskTheMoneyCoach.com.

Lynnette Khalfani-Cox is a personal finance expert and co-founder of the free financial advice site, AskTheMoneyCoach.com. Follow Lynnette on Twitter @themoneycoach.