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By W D Adkins
How to Improve Credit History
If you have bad credit history, improve your rating with all three of the major bureaus that issue credit reports by building good credit and checking your score regularly.
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By W D Adkins
OverviewWhenever you finance a car, open a credit card account or apply for a mortgage, you add to your credit history. Each of the three major credit reporting agencies (Experian, TransUnion and Equifax) keeps a separate version of your credit history based on the information your creditors provide. You can improve credit history even if you’ve had problems in the past although it does take time. It’s well worth it though. Having a good credit history raises your credit score, giving you access to more credit and better interest rates.Step 1Obtain copies of your credit history from each major credit agency on a regular basis. You are entitled by law to a free copy annually from each major credit reporting agency. Review these and make sure any inaccurate information is corrected. The FTC (Federal Trade Commission) authorizes only one provider for the free annual reports. (See References below.)Step 2Pay bills on time. This is the single most important thing lenders look at and is the most heavily weighted when your credit score is calculated. A rare late payment of a day or two won’t seriously impact your credit history, but even a single bill 30 days overdue can take 100 points off a credit score. If you are having money problems, contact your creditors. Many will make an arrangement to give you time to get caught up (especially if you’ve been a good customer for a long time) and won’t report the delinquency if you adhere to the agreement.Step 3Reduce your overall debt. The total debt you have compared with your income is a major concern for lenders. If your creditors see that you have too much debt listed on your credit history, they are going to be reluctant to extend more credit. It takes time to reduce debt, but there are some ways to improve your credit history in this regard fairly quickly. One is to consolidate debts so your monthly payments are lowered. This makes it easier for you to make timely payments and so makes you a better risk. Also, focus on paying off unsecured debt first. For the lender, this is the highest-risk debt, so the less you have, the better it looks on your credit history.Step 4Get rid of excess available credit. It might seem that having a credit card with a balance of $500 and a credit line of $5000 is a good thing, but it can look bad on your credit history. Lenders know there’s nothing to stop you from going on a shopping spree and spending that other $4500, so they regard available credit, even if you never use it, as increasing the risk you pose as a borrower. Call your credit card providers if you have large amounts of unused credit available and ask for the credit limit to be lowered.Step 5Do not apply for credit or close accounts without good reason. Lenders know that people who are constantly opening and closing credit accounts usually aren’t managing their money well and so aren’t good risks. Only apply for credit when you have a specific reason. If you do want to close some accounts, keep it infrequent (no more than one per year). One encouraging note: This type of information only counts on your credit score for a short time (a year or less) so refraining from changing accounts around is a fairly quick way to improve credit history.Step 6Avoid problems that stay on your credit history for many years. These include mortgage foreclosure and bankruptcy. Other major black marks are tax liens and defaults or court judgments against you for unpaid bills. In the event you do have one of these items on your credit history, there are a couple of steps to take. First and foremost is to get your current use of credit in order and keep it that way for at least two years. Your recent credit history is the most important and weighted most heavily when a credit score is calculated. The older a negative item is, the less effect it has. The second thing to do is contact any creditors where your account is in default and voluntarily make arrangements to start paying off the debt. That won’t remove the negative information immediately, but making payments looks a whole lot better than being in default.skill4ingredientUp-to-date copies of credit historyingredientsUp-to-date copies of credit historykeywordcredit history rating debt scorekeywordscreditkeywordshistorykeywordsratingkeywordsdebtkeywordsscoreResourcesreferenceHow Credit Scores WorkreferenceAnnual Free Credit ReportsreferenceEstimate Your Credit Score
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