Credit Report 101: A Simple Guide To Building Your Score
Credit history can determine whether you get a good job, a decent apartment, a deal on your cell phone and reasonable rates on insurance. If you're just starting out. you have a once-in-a-lifetime opportunity to build a credit history the
right way. Here’s what to do and what to avoid...
- #1 Check your credit report. Credit reports are used to create your credit scores, a three-digit numbers that lenders typically use to gauge your creditworthiness: 1) Equifax - $12.95/month; Experian - $14.95/month; Trans Union -
$7.95; 2) You're entitled to a free annual look at your reports from AnnualCredit Report.com; 3) Can you have a credit report if you’ve never had credit? Maybe; 4) Somebody else's information could be mixed in with your report,
either through a credit bureau mistake or because of identity theft; 5) You'll need to dean up your credit report before trying to apply for new accounts. Check The Federal Trade Commission's identity-theft site.
- #2 Establish checking and savings accounts: 1) Lenders see bank accounts as signs of stability.
- #3 Understand the basics of credit scoring: 1) The important factors: Whether you pay your bills on time. How much of your available credit you actually use; 2) Payment history; 3) Amount owed (what are determining your score);
4) Length of credit score; 5) Type of credit used; 6) New credit; 7) Set up automatic payments or reminder systems so that you're never, ever late!; 8) Keeping your credit use to less than 30% of your credit limits (10% is better);
9) Pay your bill in full each month.
- #4 "Borrow" another's record: 1) 619 or lower; 2) 620-659; 3) Average US credit score is 678. Check their record before you borrow (660-719); 4) 720-749; 5) 750 and up; 6) By being added to a credit card as a joint account holder
or by getting someone to cosign a loan for you.
- #5 Apply for a secured credit card: 1) Have no application fee and a low annual fee; 2) Have no application fee and a low annual fee; 3) Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments; 4) Be
reported to all three credit bureaus. (Equifax, Experian, Trans Union); 5) Opening a slew of credit accounts in a short period of time can make you look like a risky customer.
- #6 Get a store card. One or two of these cards is enough: 1) These cards don't do as much for your credit scores as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.
- #7 Get an installment loan to get the best credit score: 1) Including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages).
- #8 Use revolving accounts lightly but regularly: 1) You have to have had credit for at least 6 months, with at least one of your accounts updated in the past 6 months; 2) Using your cards regularly should ensure that your report is
updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it. the issuer could cancel the account.
- "Pay on time, wipe out debt, raise credit score". If you don't like what you see, can you improve your score? Yes. Fortunately, scoring models put more emphasis on the present than the past. So with every bill you pay on time and
every debt you wipe out. your score will rise.
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