Build a Solid Credit History

What’s the value of establishing a good credit history? It’s more than ensuring that you can get credit when you need it and borrow at the lowest interest rate possible. It may also impact your ability to get a job, insurance or rent an apartment.

Build a solid credit history, and it will become one of your most useful and powerful financial assets. There are three main credit agencies that gather financial information on individuals. The information they compile includes basic data such as age, Social Security number, current and previous addresses, employers and marital status. In addition, your borrowing history including credit cards, student loans, automobile loans and mortgages will be included. Your credit report comprises all of the credit relationships you have including when each account was opened, the balance, available credit and whether or not your payments were made on time.

Your credit score

The credit agencies use a complex formula that compiles all of the information above to arrive at your credit score. This is a number from approximately 150 – 900 that rates your creditworthiness. The higher the score the better, a low score indicates that you may not be a good risk to lenders and others who may request your credit report.

Factors that positively impact your credit score include:

• Some -- but not a lot -- of loans or credit card debt
• Prompt payment of monthly bills
• Paying down balances over time
• Steady employment

Items that can hurt your credit score include:

• Too many credit cards
• Too many applications for credit
• Late payments
• Increasing credit card balances

Get a free credit report

It’s important to make sure your credit report is accurate and up to date. This will help protect you from identity theft, as well as catch any errors that may be impacting your credit score. You’re entitled to obtain a free credit report from each of the three reporting agencies every year – for your online copy, visit www.annualcreditreport.com.

Being aware of your credit report, making sure it is accurate, working to improve your credit history and understanding the importance of your report can all help you ensure that credit will be there when you need it.