Good credit is a vital aspect of life. At one point or another we all need credit, unless your an off the grid mountain man that is. Good credit allows us better interest rates on loans and credit, landlords for good properties use credit reports to decide weather to rent to you or not, and many jobs in today’s day and age also make use of your credit report. You also need a good credit score to obtain a personal loan. The better your credit score the better interest rates you will receive for a personal loan. Personal loans tend to have higher interest rates than car loans or mortgages. With so much riding on your three credit reports you should take steps to make sure that your credit report reflects the best possible score.
The first step in building a good credit score is to see what the credit reporting agencies have to say about you. You can pull your credit reports from annualcreditreport.com. You should verify that every piece of information on it is factual and correct. As much as 26 percent of all credit reports contain at least one nonfactual negative piece of information that impacts the persons credit score. By law You are entitled to one free copy of your credit report every year from all three credit reporting agencies. The three major ones are Experian, Equifax and TransUnion.
If you have any outstanding debts listed as late or non payment status you need to clean these up. These are known as derogatory items. Pay off any small balance debts and make payment arrangements or payment plans for large debts that you can pay off quickly. Do not just pay the debts off but also contact the creditor to let them know you intend to make the debt current and correct your past mistakes. This will help ensure that the payments you make towards your debt will be properly recorded on your credit report. You can provide to the reporting agencies up to a 100 word statement relating to any derogatory item on your credit report to explain any extenuating circumstances and by law it must be included on any credit report which is distributed to third parties.
Negative items can remain on your credit report for a total of 7 years from the date of last activity on the account. Each passing year the impact of the derogatory items fades in regard to their impact on your credit score. You can while cleaning up any past debts try and open some small lines of new credit. If you got his route it is vital that you never ever be late with a payment and keep current with your payments. This will help you to re-establish your credit or if new to credit to build it up. You should however keep applications for credit to a minimum, as every time you apply for credit an inquiry appears on your credit report, and these inquiries reduce your credit score for a time, usually about 6 months. If you do get a new line of credit try not to use more than 30% of your credit limit as using any more than 30% can negatively impact your credit score.