A credit report is a summary of an individual’s credit history created by a credit bureau. It is a review of how an individual has handled their credit accounts, including the different types of accounts and payment history. A credit report will list bill payment history, current debts, credit card payment, loan repayment history, and other financial information. It also shows if someone has been sued or filed for bankruptcy.
Credit reports guide lenders by helping them decide if they want to give someone credit or a loan. It also helps them decide the rate of interest to charge. Employers, insurers, and banks look at credit reports to determine if they want to give someone a job or grant them a loan. As a result, it is essential to regularly review a credit report and take steps to ensure that it is accurate and complete. Credit bureaus, also called Credit Reporting Agencies or CRA’s, collate financial information about an individual and create reports based on that information. These credit reports are then used by lenders to check an individual’s creditworthiness.
Here are a few tips to have a good credit report.
Set up payment reminders
To have a good credit report, one needs to make credit payments on time. Hence, it is important not to miss any payment. Payment reminders can be set up online or on a calendar so no payments are missed.
Pay more than once
If possible, make multiple payments in one billing cycle. One can look at making payments every two weeks rather than once a month. This will help improve the credit score and lower credit utilization.
Don’t apply for new credit frequently
Applying for new credit accounts would increase the credit score, but it would harm the credit report if one applies for new credit accounts in a short period.
Pay ‘maxed-out’ credit cards
If one holds multiple credit cards, always look at paying the card that’s utilized to its maximum. This would bring down the credit utilization rate and hence help one maintain a good credit score.
Close unused credit card accounts
The age of credit history matters a lot. So, if one is looking at closing credit cards, always look at closing the newer credit card account and keeping the older ones.
Credit utilization
It is important to pay close attention to credit utilization. Credit utilization is defined as the credit one is using divided by the credit they have available. Credit utilization makes us 30% of the credit score and is most often overlooked when one wants to improve their credit report.
The tips mentioned above will help one start a good credit report. If someone doesn’t have a credit history, they should get started soon. A positive report is helpful to have a stable financial future. It helps in renting a home, buying a home, applying for loans, or even when looking for a job.
The easiest way to start a credit report is by applying for a line of credit and paying bills on time. A credit report consists of a credit score that ranges from 300 to 850. A score of 300 is considered poor, while a score of 850 is considered excellent. A high score is a result of good credit histories, on-time payments, and good credit utilization. A low credit score could be because of late payments or overextended use of credit. There are no such cut-offs to have good credit or a bad credit score but guidelines for both.
