Five Steps to Building a Good Credit History

Good credit is important in so many aspects of your life. Though you can get by without having a good credit history, it will be an unnecessary hassle. Work on building a good credit history so that you have good credit when you need it.

Get credit. To build a good credit history, the first thing you need to do it get credit. Your credit score, the numeric snapshot of your credit history, can’t be calculated if you don’t have at least one account that’s at least six months old. So, get a credit card or a loan to help you start building a credit history.

Use credit. Just having credit isn’t enough to build a good credit history. You actually have to use credit (responsibly) to show start creating a positive credit history. When you use credit, especially credit cards, you should never charge more than you can afford to pay back. Credit isn’t a substitute for cash and shouldn’t be used as one.

Pay your bills on time. Once you get a credit account, it’s important that you pay it on time. The most important part of your credit history is how well you’ve paid your bills. So, make sure you pay your credit card and loan bills on time every month.

Building a good credit history isn’t just about paying credit card and loans, it requires you to pay all your bills on time. If you fall behind on other bills, like utility or cell phone bills, it could end up on your credit report as a debt collection. These collection accounts hurt your progress with building a good credit history.

Keep your balances low. The second most important part of a good credit history is the amount of debt you have. Your credit history is better when you only use a portion of the credit available to you. So, when you make purchases on your credit card, only use about 10% to 30% of your credit limit. Paying down loan balances quickly also helps build your credit score since it shows that you’re reducing the amount of money you owe.

Hold back on new applications. Avoid taking on too much credit at once. The more credit applications you make, the harder your credit score gets hit. That’s because recent applications for credit account for 10% of your credit score. You should also limit your credit and loan applications to avoid taking on more debt than you can afford. Starting out with just one or two credit cards or loans is ideal.

A good credit history takes time to build. You can’t rush a good credit score. Instead, you have to take it one step at a time making the best credit decisions along the way.

Your credit score is one of the most important numbers in your life. It’s a reflection of your creditworthiness and is based solely on information that’s in your credit report. Your credit score is calculated using five different criteria: your payment history, level of debt, credit age, mix of credit, and credit inquiries.

Hard vs. Soft Inquiries

Credit inquiries are placed on your credit report whenever a business pulls your credit report. Sometimes this happens when you make an application. These are known as “hard” inquiries. Other times it happens when a business wants to promote products or services to you. These are called “soft” inquiries. Your own requests for your credit report are also soft inquiries.

Soft inquiries don’t affect your credit score. However, those hard inquiries made when you put in applications do affect your credit score. Credit scoring researchers have found that borrowers who have a lot of credit inquiries within a short period of time are more likely to default on their accounts.

How Much Will an Inquiry Affect Your Score

Just how much your credit will be affected by credit inquiries depends on your current credit score and the other information in your credit report. Generally, you can expect inquiries to only have a small impact on your credit score since they only accounts for 10% of your credit score. According to FICO, developers of the FICO score, an additional credit inquiry will likely take a maximum of five points from your credit score. You’ll receive greater damage to your credit score if you only have a few accounts on your credit report or if your credit history is short.

Credit Inquiries and Rate Shopping

Some credit scoring calculations won’t penalize you for rate shopping, as long as you do your shopping within a certain period of time, typically 30 days. (Note: some credit scoring models have a 14-day window while others have a 45-day window.) All inquiries made within that 30-day window will be treated as a single inquiry and your credit score won’t be affected during that time. After you’re done rate shopping, those multiple inquiries will be treated as a single inquiry rather than several separate ones.

Credit Inquiry Time Limits

Fortunately, credit inquiries only remain on your credit report for 24 months. Even better, only those inquiries made within the past 12 months are included in your credit score. As inquiries pass that one year mark, they no longer affect your credit score.

Your credit is becoming increasingly important as more businesses rely on your credit to make decisions about you. Many of the applications you put in require a credit check, even those that have nothing to do with credit cards or loans. When you have bad credit, you’re always on edge, wondering whether your application will be approved or denied. You can eliminate that feeling by repairing your credit. Visit www.AttractiveCredit.com to have professionals do the job.

The goal of credit repair is to improve your credit score so your applications will be approved and your interest rates will be lowered.

Cleaning Up Your Credit Report

A major part of credit repair involves cleaning up negative information on your credit report. Since your credit score is calculated directly from the data in your credit report, any negative information will pull down your credit score. Damaging negative information includes late payments, debt collections, charge-offs, foreclosure, bankruptcy, repossessions, and lawsuits. High credit card balances and excessive credit inquiries can also pull down your credit report.

Adding Positive Payment History

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Though it plays a big role in credit repair, clearing your credit report of negative information is only part of credit repair. If you have very few open credit accounts or all your accounts contain negative information, you need some new accounts to begin building some positive payment history. The more positive information you add to your credit report, the better your credit will be.

Paying Down Balances

High credit card balances could be dragging your credit score down. Credit repair involves reducing these balances or raising the credit limit on those accounts so the balance-to-credit ratio on those accounts decreases.

How We Can Help

Credit repair isn’t rocket science. You can complete many of the credit repair steps on your own. However, many consumers don’t feel comfortable attempting credit repair themselves because they’re unfamiliar with the steps required. That’s where a credit repair company can help. Credit repair companies have trained, experienced professionals who know the steps to take to improve your credit. They can review your credit report and help you decide what needs to be done to repair your credit.

There are a lot of credit repair scams out there, so it’s important that you be careful about the credit repair company you choose. Credit repair companies are required to let you know your federal rights pertaining to getting a credit report and disputing inaccurate credit report information. They also must include specific details about their services inside their contract and let you view the contract before signing it.