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Establishing & Rebuilding your CreditA well-established credit history can make your life much easier. Everything from buying cars to getting a new job can be impacted by your credit history. You should begin to build good credit as soon as possible. Start small: apply for credit with a local business, such as a department store, local bank or credit union. These merchants may relax their credit standards for people in the neighborhood. Make sure the credit grantor reports credit information to one of the major U.S. credit bureaus. You'll be building good credit with every bill you pay. If you are still having difficulty opening a credit account you may want to ask a friend or family member to cosign your loan or credit card application. Warning: if you do not pay every bill on time, you run the risk of damaging the cosigner's credit rating. Many banks offer a secured card, which is guaranteed by a deposit you make with the card issuer. Your credit limit will be equal to the amount on deposit. You can also plan a credit strategy much like you would a budget to improve your credit worthiness. Taking steps like applying for a major credit card if you only have local credit, closing old unused credit accounts, and keeping tabs on the number of inquiries in your report can improve your credit status. See our tips on Handling Your Credit to Prepare for the Future for details. Monitoring and Managing Your Credit Pay your bills on time! It seems obvious, paying your bills on time is the best way to build a solid credit history. Review your credit history. Many credit reports contain inaccuracies, usually caused by innocent errors. The Fair Credit Reporting Act ensures your right to dispute such inaccuracies in your credit report without charge. (For information about how to do this, see our Dispute Information.) Have you been the victim of identity fraud? Check your credit report carefully. If there are any accounts that you don't recognize, contact the creditor immediately. Order a copy of your credit report online. Skip the "Credit Repair" Clinics Although some consumers pay credit clinics hundreds or even thousands of dollars to "fix" their credit reports. The Federal Trade Commission has investigated and reported at length on these often-fraudulent "clinics." And some unscrupulous credit repair plans actually encourage you to commit fraud yourself by attempting to create a second credit identity. The key fact: There is nothing a credit repair clinic can legally do to fix a credit report that you can't do yourself – for free. Consumer credit reports contain easy-to-follow instructions for disputing inaccurate information at no charge. Federal law mandates that accurate information showing negative payment habits will remain on a credit report for seven years, with bankruptcies remaining for up to 10 years. Only time and responsible use of credit can repair a bad credit history. |
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