Building your credit history now, the right way, ensures you'll be able to qualify for various types of credit in the future. To establish good credit, always pay your bills on time, keep your balances low, and try not to apply for too much credit at one time. Here are a few ways to immediately start building your credit history.
A credit report is a lot like a report card—it showcases your strengths and weaknesses and, yes, it can affect whether you get a job, a loan, or a place to live. Credit reports include:
You name, Social Security Number, birth date, current and previous address, and current and previous employers.
When each account was opened, credit limits, loan amounts, balance due, monthly payments and timely or late payments.
Information from government sources like bankruptcy, court records, tax liens, monetary judgments and overdue child support.
Anytime a person or company accesses your credit report, the inquiry is recorded and generally remains on your report for up to two years.
Don't forget to review your credit report annually. Request your credit report »
A credit score is a rating assigned to you based on information contained in your credit report. Scores generally range from 300 to 850. Your score is heavily determined by five factors:
Your Payment History
Paying bills on time boosts your credit profile.
Amount You Owe
The higher the debt load you carry, the lower your score.
Length of Credit History
The longer your credit history, the higher your score.
Frequent credit applications or requests for your credit report by creditors raise red flags.
Types of Credit
Having different types of credit (installment loans, charge cards, or lines of credit) is viewed positively.
A bankruptcy filing will remain on your credit report for up to 10 years. It can affect your ability to get credit and may also prevent you from getting a job. Keep in mind that even if you file for bankruptcy, some of your debts may not be forgiven and your belongings may be repossessed or sold to pay off existing debt.
Instead of filing, consider other, more positive solutions to your financial problems, such as our personal finance counseling. There is no charge for this service and assistance can be offered over the phone or in-person at select branches. Call us at 1-888-503-7106 (703-255-8492 in metro Washington, DC) for more information.
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Lenders look to your credit score to predict future financial behavior. The higher your credit score, the easier it is to qualify for loans, rent an apartment, or even land a job or promotion.
If you're struggling to make payments on time, ask your creditors about alternate payment arrangements and automatic bill pay.
Always try to pay more than just the minimum balance on credit cards. Start by tackling credit card balances that are approaching their limits. Once a balance is paid off, move on to the next highest balance. And remember to never charge any single credit card or credit line to the maximum.
Only apply for new credit as needed and manage your existing credit responsibly.
When you start shopping around for a car or mortgage loan, try to keep your inquiries within a 45-day period.
The best way to improve your score is by paying down your existing debt, not shifting it around.
Make sure to review your credit report at least once a year, especially before applying for a loan. If you notice any errors, contact the creditor and credit bureaus immediately