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Ten Steps To Building A Good Credit History
Are you thinking of buying a house? Do you want to buy a new
car to replace that old wreck? Trying to get insurance on you
home, auto, or life? In each of these situations, what's on your
credit report will determine if you can get a loan or insurance
and what rates you'll have to pay.
If you're trying to build or repair your credit history, you
have a daunting but not impossible task in front of you. Lots of
people have been where you are and today they have good credit.
With time, discipline, hard work, and by taking the proper steps,
you'll be able to build a good credit history too.
To build or rebuild your credit history you need to take
certain steps:
Develop a budget and live by it. Whether your building credit
for the first time or rebuilding credit, you need to know how
much money you have coming in each month and how you're spending
it.
Start by listing your income from all sources. Next list all
fixed expenses (rent, mortgage, car payments?). Finally list all
of your variable expenses (entertainment, recreation, clothing?)
no matter how small they are. Writing down and tracking your
expenses will help you to understand your spending patterns and
you'll be able to see where you can save money by making
lifestyle changes.
Open a checking account and use it responsibly. Lenders want
to know that you have a relationship with a financial institution
and that you have a checking account available to pay your bills.
Don't overdraw your bank account; in addition to possible
damaging your credit record, you'll be charged fees.
Pay your current bills on-time and pay them in full. Paying
your bill on-time puts positive information on your credit
record. Late payments or missed payments count against you.
Review your credit report annually. Contact Equifax, Experian,
and Trans Union to get copies of your credit report. You should
get a copy of your credit report from all three reporting
agencies because some creditors don't report to all three
agencies. If you're a member of a credit union, check to see if
your credit union offers discounted credit report ordering for
its members.
Fix any errors on your credit report. If you find errors on
your credit report, contact the credit reporting agency and the
creditor (in writing) to get the errors fixed. Check your credit
report to make sure that negative information like late payments,
delinquencies, liens, and judgments against you have been removed
after 7 years; bankruptcies should be removed after ten
years.
For more information on how to dispute errors on your credit
report, visit the Federal Trade Commission website at: http://www.ftc.gov/bcp/conline/pubs/credit/crdtdis.htm.
Apply for a credit card. If you're rebuilding your credit
history, consider applying for a secured credit card. To get a
secured credit card, you'll need to deposit funds with the credit
card issuer and your credit limit is usually equal to the amount
you deposit. A secured card can be used the same way as an
unsecured card and your timely payments will help to improve your
credit history.
Apply for a department store or gasoline card. These cards are
usually easier to get than major credit cards and they come with
smaller credit limits.
Establish an account at a credit union and take a loan out on
it. This is a secured loan. You'll have to pay interest on the
loan, but if your payments are reported to the credit bureaus,
the small interest fees will be worth the positive information
that is added to your credit record.
Don't max out your credit cards. Maxing out your credit cards
can hurt your credit score. Try not to use more than 30% of the
credit you have available to you. Part of your credit score
measures the amount of credit that your have available to you and
how much you're using. The more credit you're using, the more
negative impact on your credit score.
If you get into trouble with your credit, get help. Don't wait
until creditors send your accounts to debt collectors. If you
can't make a payment contact the creditor and make arrangements
to make the payment. If you feel that you're over your head in
debt get help from a debt counselor.
You can contact Equifax, Experian, and Trans Union at:
Equifax: www.equifax.com/
Experian: www.experian.com/
Trans Union: www.tuc.com/
About The Author
Drahcir Semaj is a freelance writer. You can contact him at
drahcir@drahcirsemaj.com.
Or visit his website at http://www.drahcirsemaj.com
MORE RESOURCES:
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