by Pamela Days-Luketich
Community Outreach Officer, Liberty Bank
Having good credit is important, especially if you're looking to purchase a home or get another type of loan. But where do you start? And what if you've made credit mistakes in the past? Let's take a look at 7 tips for building and repairing credit.
- First, check your free credit report. Before you can improve your credit, you need to know your starting point. To get a free report, visit www.annualcreditreport.com. You can pull one free report per year from each of the three credit bureaus, Equifax, Experian, and TransUnion. So, if you want to look at your credit reports a few times a year, you can stagger your requests.
- If there are any errors on your credit report, dispute them with the bureaus. They have forms on their websites or you can send them a certified letter. For a sample dispute letter, go to https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-error....
- Whether you're just starting to build credit, or working to repair it, the number one thing you can do to ensure good credit is pay your bills on time. Payment history accounts for 35% of your credit score.
- To improve or build credit, consider applying for a secured credit card or a credit building loan from your bank. A secured card is a credit card that requires a refundable deposit in exchange for a credit limit. Credit building loans hold the amount borrowed in a bank account while you make payments, building credit.
- Be wary of apps, web sites or companies that say they will monitor, build, or repair your credit for free. Many times you can be given misleading information or charged hidden fees, or your personal information can be sold.
- Use as little of the credit limit on your current credit cards as possible. Use no more than 20 to 30 percent of your available limit. Then, be sure to pay your balance in full each month. It is recommended to keep your total credit utilization rate (your total debt divided by your total available credit) under 30%.
- Finally, consider becoming an authorized user on someone else’s account. Be careful with this one, though. If the account holder is carrying a high balance, this will affect your credit utilization rate.
Always remember to remain diligent about managing your credit. Regardless of your income level or stage of life, you (and only you) determine your credit history—and ultimately, your financial future.