Before we go any further, let's start right off talking about some of the important things to do in order to maintain a good credit score and make sure you know them before you even start to establish, re-establish or re-build credit. Here are 7 things to do. Read #1 over and over again and never forget it, that always ranks as the key to keeping up a great credit score.
Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score. From the point of view of the credit reporting bureaus you may want to note that "late" usually means 30 days late. This means your goal should be to pay things before the due date, the next best choice becomes avoiding the late fee date, perhaps at 10 or 15 days late. The most important date for avoiding a bad credit report starts with missing a payment by 30 days. If you can't afford to pay everything on time you may want to read Who to pay when you can't pay everyone or other materials at Bankruptcy Alternatives - Debtor's Options.
Check your credit report regularly and take the necessary steps to remove inaccuracies
Don't let your credit health suffer due to inaccurate information. If you find an inaccuracy on your
contact the creditor associated with the account or the credit reporting agencies to correct it immediately. Don't avoid this step because you think you will not understand a complicated credit report. Guides to interpret your credit report can help make that easy. Cost should not stop this process either. Once per year you may obtain free reports. These free credit reports will not contain your credit scores, they will show the items that make up the credit report and help you discover if there exist any erroneous items. If you discover entries in your credit report that do not belong there you may hire a professional to help remove them or follow through on the correction process on your own.
Resolve Negative Open Items
If you find you get in trouble in the future don't ignore it. Talk to the creditor, deal with it, resolve it and try to get things back in order. Ignoring problems creates bigger problems when it comes to your credit.
Watch your debt
Keep your account balances below 50% of your available credit. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $500. Some people would argue that to help boost credit scores the most this level should be down closer to 20%. When you have the available cash paying down revolving accounts like credit cards helps increase your report score. Do not feel the need to pay off secure loans like mortgages and auto notes, but be aware that keeping those current each month can be more important than anyhting else when it comes to keeping up your credit score. If you have credit card balances without the ability to pay them down or pay them off you may want to make an effort to even them out. For example you may be better off having a $1000 balance on five cards each rather than a $5000 balance on one card, particularly if the limit on that card is $5000. Your credit score may take a hit when lines seem "maxed out". When evening out cards try to even them out relative to their limits. For example if you want to even out two cards with a total of $2000 in debt, even them out by leaving $500 on the card with a $5000 credit limit and $1500 on the card with a $15,000 credit limit.
Give yourself time
Time is one of the most significant factors that can improve yourcredit score.
Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use. For those just starting out once you have some credit established you may want
Adjust your credit limits
Remember the tip above to keep your ratios at 20%-50% or less of credit used versus credit available? If you can not pay down accounts and your credit is good enough to get an increase you may develop a better ratio by increasing the credit line. This does not mean you should use the extra money on the line, in fact if you think you might even be tempted to access the new credit this may be a dangerous method and should be avoided. Even when attempting a credit limit boost, don't go too far. If you have a $1000 credit card limit all used raising the limit to $2000 up to $5000 puts you in the 20% to 50% range. Having a limit of anything more than $5000 may even hurt your score because you may be viewed as having enough credit already or that you are exposed to becoming over extended. If you already have cards with balances under 20%-50% of their limits you may want to call the credotors and have these limits reduced in an attempt to add a few points to your credit score fast. Keep in mind that these techniques for adjusting ratios remain much more speculative methods then those cited above and that each of the bureaus may interpret credit ratios in their own way.
Establish Various Types of Credit
If you only have a mortgage and a car loan you may want to establish a credit card account. If you have no mortgage you may want to get your rent reported on your credit report. If you never had a car loan you may want to get one the next time you buy a car. Do not go buy a car if you don't need one just to attempt to gain a few fast points in your credit score, but if for example you may want to buy a house in the next few years and have very little established credit getting a car loan instead of paying cash for the car will help establish credit and if paid timely help improve your credit score so that when the time comes to get a mortgage you will be ready. If you have no credit at all yet you can always start with a secured credit card. The three main items to consider here should be mortgages, car loans and credit cards. Do not attept to have type of every department store credit card, gas station credit card or charge lines at local businesses.
We will proceed in this guide to walk you through parts of this process, provide further education and help you build a strong foundation for a long future of great credit!
This article has been
and Bankruptcy Alternatives - Debtor's Options
Other sources for this article besides TrueCredit and Mory Brenner, Esq. include FICO's own article on improving your FICO score, Credit Inquiries article by FICO, 101 tips to increase credit score, 7 tips to increase credit score and tips for boosting credit score.