In order to retain a healthy and steady credit score, having a close look at the interest rates has become crucial for individuals today. According to Scott Tominaga, high interest rates can quickly go beyond control, causing debt to sore, and lowering the credit score. Below are three practical facts to remember to avoid the above experience. 

1. Understand How Interest Rates Impacts on Credit Utilization

Interest rates impact directly an individual’s credit utilization ratio, which eventually becomes a noticeable factor in determining the credit score. Credit utilization refers to the ratio of credit people have used against their available credit. For example, if a person has a credit limit of $20,000 and the current balance is $6000, the individual’s credit utilization stands at 30%. A high rate of interest is charged in this case, resulting in an abrupt increase in the balance in due cause, if the person is only making the maximum due payments. Apart from making the debt harder to pay off, and raising the credit utilization ratio, it will negatively impact the credit score. 

To avoid this, be determined to pay off the balances in full as far as practicable. If doing so seems out of capacity, make sure to keep the credit utilization ratio below 30%, precisely as minimum as possible, as per Scott Tominaga.

2. Check The Credit Reports Regularly

Although checking monthly credit reports should be an important practice to keep control of interest rates, a vast number of people simply ignore reviewing their credit reports. Credit reports comprise the particulars of one’s credit history, counting one’s account balances, details of payment history, and major demerit points, if any. Having a glance at the report will help individuals to recognize if any errors or discrepancies ( like a missed payment or late payment, closed account showing open, accounting error, etc.) are there, which could be the reason affecting their credit score, contributing to higher interest rates. 

Moreover, having an awareness of individuals’ credit status can be instrumental for them to take proactive steps as they notice a drop in their score. For instance, if a person finds that his/her credit score has declined, they can examine the causes like high credit utilization or missed payment, and act accordingly to address much before it might have a severe impact on credit score. 

3. Look for Best Interest Rates

While lending money or opting for a new credit card, make sure to shop around to know which financial institution offers the most competitive interest rates as it can make a notable difference in their overall financial health. Based on an individual’s credit score, often lenders offer varying rates of interest while a minimal difference even in interest rates can save a lot over time. 

Also, compare rates of interest from several sources, such as banks, private lending companies, and credit unions, and also go through the terms of payment, etc before choosing one. 

To conclude, individuals should also check if they qualify for any promotional rate or introductory offers that can contribute to getting short-term relief from a high rate of interest.