Your credit reputation can have a big impact on your ability to achieve your financial goals. Your credit reputation is determined by the information in your credit report, such as the status of your credit accounts and information about your credit history, and also by your credit score, a number that is used to predict how likely you are to pay back debt. Maintaining or building a good credit history can make it easier to get a loan, rent a new apartment, or even get a job down the road.
While each person’s situation is different, these 5 tips can provide useful information for most people on how to build strong credit:
1) Check your credit report regularly.
Did you know that you have access to a FREE copy of your credit report three times per year? You are eligible to check your credit once per year though each of the three major credit reporting bureaus – TransUnion, Equifax, and Experian. By checking a different bureau every 4 months, you can monitor your credit activity and catch errors sooner than later. If you see anything on your credit report that doesn’t look right, contact the credit bureau immediately for more information.
2) Establish a credit record.
If you don’t have much credit history, it may be a good idea to open an account that will help you build your credit. In general, a longer credit history may increase your credit score, so you can help yourself out in the long run by starting to build good credit today. Products such as a secured credit card may be a low-risk way to prove to lenders, landlords and employers that you can be responsible with your obligations.
3) Make payments on time.
Don’t skip any payments on the debt you owe. If you miss a payment, send it as soon as you can to minimize the negative impact on your credit. If you have difficulty remembering to pay your bills on time, setting up payment reminders or scheduling automatic bill payments can help you stay on top of your debt.
4) Don’t “max out” your credit cards or credit lines.
Try to steer clear of the credit limits on your accounts. On top of any fees or penalties that might result from exceeding your credit limits, your credit score typically will drop as a result of high credit utilization rates.
5) Identify the factors affecting your credit standing and plan accordingly.
Take advantage of your free credit reports, identify the areas that are negatively impacting your credit, and plan a budget that will help you address these areas. You can use resources such as the Federal Trade Commission’s Consumer Information and this breakdown of what's in your credit score to gain a broader picture of the factors impacting your credit and understand your options.
To access your free credit report, www.annualcreditreport.com.