Most people know that credit history is important for obtaining loans, finding a job and applying for a credit card, but do you know why your credit report is important? This single aspect of your life can have an enormous impact on your finances, so it is essential to understand how to build a better credit report.
Why Should I Build a Better Credit Report?
When you build a better credit report, you will likely save money and enjoy a more secure financial future. Each time you apply for a credit card or a loan, the lender will access your credit history to determine what kind of risk you pose as a borrower. A better credit report will result in better terms for your loan or line of credit.
This means lower interest rates, fewer fees, better chances for approval and improved terms. A better credit report often results in your ability to take advantage of lender promotions such as zero-percent financing for a specified term.
What is the Fair Credit Reporting Act?
One of the most important things you need to know when building a better credit report is how the Fair Credit Reporting Act affects your financial life.
The FCRA determines your rights as a consumer and the requirements of credit reporting agencies. Under the FCRA, you have the right to access your credit report and to know when lenders, employers and other entities have used information in your report against you (denying your loan application, for example). You also have the right to dispute any information you believe is inaccurate and to choose who has access to your report, and when. Knowing your rights and the requirements of the credit reporting agencies can help you build a better credit report faster.
How can I Improve my Credit Report?
The only way to build a better credit report is to practice positive financial habits. This means paying bills on time, carrying as little debt as possible, maintaining good relationships with creditors and living within your means. Just because you have access to credit does not mean you should use it.
Having a credit card (or several), for example, can help your credit report, but carrying a hefty balance on all the cards in your wallet can hurt it. This is why many consumers choose to pay off their balances each month, which also saves you from paying interest and fees on the money you borrow.
Too many inquiries on your credit report can be detrimental, so you don’t want to apply for 10 credit cards at once. Keep your applications to a minimum and spread them out so they don’t all hit your report simultaneously. Similarly, avoid applying for multiple loans at the same time.
You will also notice that building a better credit report is easier as you get older. One of the factors that impacts your credit score is the longevity of your credit history; the presiding wisdom dictates that mature consumers are less likely to act irresponsibly with credit.
Finally, dispute any inaccurate statements on your credit history immediately. Building a better credit report is impossible if you don’t know what the report contains, so take advantage of the annual free report that the agencies — Experian, Equifax and TransUnion — provide. If something seems inaccurate, file a written dispute so it can be investigated.
How Long Will it Take to Build a Better Credit Report?
The length of time required to build a better credit report depends on your situation. For example, it might take less time for a young consumer to develop a credit history from scratch than for an older consumer to repair negative accounts on a credit history.
Most negative information on your credit report will be there for about seven years, though some delinquencies and defaults can remain for much longer. However, increasing your positive payment history can reduce the impact of a bankruptcy or defaulted credit card, so don’t give up.
This is one of the best way to get the good credit report and good points in an credit report by paying all dues and the payment on the time.
Comment by C. Redit — January 5, 2010 @ 6:17 am