4 Steps to Building
(or re-building)
Great Credit
Your credit history can make you or
break you when you’re trying to convince lenders that you’re
a good risk.
Take these steps to build the best
record you can -- well before you need it.
1.) Open checking
and savings accounts:
Having these bank accounts establishes you as part of the financial
mainstream. Lenders want to know you have a checking account available
to pay bills, and a savings account indicates you’re putting
aside something for the future.
Opening bank accounts is something you can
do even if you’re too young to establish credit in your
own name. Until you’re 18, you can’t legally be held
to a contract, so any credit you get will have to be through an
adult -- either someone who co-signs a loan for you, adds you
to their credit cards or opens a joint account with you. Having
bank accounts, though, gets you started on the right path and
gives you practice in managing your money.
2.) Get your credit
report:
Next, you need to find out how lenders view you. Most base their
decisions on credit reports, which are compiled by for-profit
companies known as credit bureaus. You can order your credit report
for a small fee from each of the three major bureaus.
Typically, a credit report includes identifying
information about you, such as your name, address, Social Security
number and birth date. The report may also list any credit accounts
or loans opened in your name, along with your payment history,
account limits and any balances you owe.
If you’re young or newly arrived in the
United States, you may not have a report or it may have little
information. If you’ve had credit problems, your report
will list them.
3.) Fix any errors
or omissions:
Some credit reports include errors -- accounts that don’t
belong to you or that include out-of-date or misleading information.
You should read through each of your three reports and note anything
that’s incorrect.
Negative information, such as late payments,
delinquencies, liens, and judgments against you, should be dropped
after seven years. Bankruptcies can stay on your report for up
to 10 years.
Once you have a list of problems, ask the bureaus
to investigate errors listed on their reports. You can use the
form that came with your report if you received it by mail, or
use the Web link if you accessed your report on the Internet.
4.) Add positive
information to your report:
The more information you can provide about yourself, the more
comfortable lenders may feel extending credit to you. In addition,
certain information -- such as having the same job or address
for a few years -- can make you appear to be more stable in lenders’
eyes. While this information isn’t used in creating your
credit score, it’s often used by lenders in addition to
credit scores to make lending decisions. You may also find that
your report doesn’t include credit accounts or other information
that it should.
Here’s a list
of items to consider:
