What If…? Find Out What Certain Actions Will Do to Your Credit Score

You know how important your credit score is. And with lenders reluctant to offer good loan terms to any but those with with the best scores, it is vital that you do what you can to improve your credit score. Credit Karma offers you a way to simulate the effects your actions have on your credit score.

A few months ago, I wrote about how Credit Karma offers great education tools — as well as free access to your credit score. Now, Credit Karma has added a practical tool that can help you figure out how you can improve your credit score. It also provides a handy guide to what might happen if you take on more debt, open a new credit line or even apply for an auto loan or home mortgage loan.

As I tinkered with the program, lowering and increasing my credit score, I found that one of the most effective ways to increase your score is to pay off debt. Paying off debt and having a good payment history largely erased the ickiness that I had gotten my simulation into by opening new credit card accounts, paying late and getting a car loan. And, of course, that bankruptcy I simulated didn’t help much, either.

Ken Lin, founder and CEO of Credit Karma, sent me this in an email regarding the credit score simulator:

We hope that consumers will be better able to manage their credit if they understand how their everyday financial behavior affects their credit score.

Overall, I think this a great tool. Before I make another credit and debt related decision, I’ll probably head over to Credit Karma to get a look at what it will do to my score.

images source: Screenshots from Credit Karma