Building a Better Credit Report
When building a better credit report, it is important to remember the main components from where your score comes. This will help you take the necessary steps to improve your score.
Start with a checking and savings account. This will help you as you try to establish other credit accounts. Make sure you keep these in good standing.
If you are a college student, it will be easy to get your first credit card. Make sure that you mark student on your application, even if you have a part-time job. You should disclose any income you earn, but make sure they know you are a student! There is no advantage to getting more than two major credit cards. Also, know your limits. Getting credit cards to improve credit will backfire if you fail to make the payments or allow your balances to balloon.
One or two store cards will not hurt, but they will not help much either. Still, these are the easiest cards to obtain and could boost newer credit histories slightly. Sometimes getting a store card first can make it easier to get a major credit card after a few months.
A vehicle loan will be one of your best credit builders if you never miss a payment. Always buy within your means and anticipate any related expenses. Credit bureaus love installment loans as they can give you a better mix of credit accounts. They also reflect your ability to make consistent payments on a long-term basis.
Your home loan will represent your top purchase, and it will be important that you have good credit and earn the best rates. A home mortgage will also build your credit rating.
Most important is making sure that you never miss a payment. If you miss one, contact your creditor immediately, arrange a fast remedy to bring the account current and plead with them to omit any negative credit reference. Creditors frequently will do this as a one time courtesy, or sometimes even once per year.
Second on the most important list is keeping your unsecured debt as low as possible. High credit card balances will reduce your score.
Finally, avoid closing old accounts that you have had forever. It can be tempting to close that one account that took you 3 years to pay off. If you keep it open, it will be a real credit builder. If you close it, it will cease to be a part of your current credit history, and its significance will fade over 10 years time.
Building a better credit report is easiest when you are first starting out. However, if you are rebuilding your report, then you may have to begin with higher rate credit to begin. Just be careful, use good judgment and ask for rate reductions as your credit improves.