Whether you’re looking to obtain your first credit card, purchase a car, or even buy a second home, at one point or another in your life, you will need to borrow. To be able to borrow affordably you’ll also need a strong credit report. A credit report is the tool that lenders use to determine whether to grant you a loan and the interest rate to offer you.
Because of the importance of your credit report, it’s critical that you to keep your credit in check. Experian, one of three major credit-reporting agencies offers these helpful tips for managing credit:
- Request a copy of your credit report each year. By law, each year, you are entitled to a copy of your credit report annually from all three credit reporting agencies – Experian®, Equifax® and TransUnion.® Checking your credit report with each of the three bureaus will allow you to make sure your credit is up to date and that no one has fraudulently obtained credit under your name.
- Know your credit score. Based on your borrowing history, the credit bureaus assign you a credit score. Your credit score is an indication of the risk involved with extending credit to you. In general, the higher your credit score, the lower the risk a lender will take on in granting you a loan. Lower risk for the lender allows them to give you a lower interest rate, saving you money. Simply put, it really does pay to be a good borrower.
- Pay your bills on time. The best way to ensure a good credit report is to pay your bills on time. Delinquent or late payments will negatively impact your credit history and your credit score. With tools like online and mobile banking, you can arrange to have your payments made automatically, so you won’t forget to pay.
- Contact lenders if you are having difficulty. If you’re facing financial hardship, the worse thing you can do is to ignore your bills. Contact your lenders immediately and try to work out payment schedules.
- Limit the amount of credit you have. Having too much debt, such as multiple department store charge cards, can negatively impact your credit score. You will, however, need to have some credit history in order to be granted a loan.
- Have different types of credit. Experian recommends that you have a few different types of credit, such as an auto loan or other installment loan, as well as some revolving form of credit, such as a credit card.
- Keep your balances low. Having too much outstanding debt or a high balance-to-limit ratio can make you appear as a bigger credit risk.
These are just a few simple steps to keep your credit in check. For more information and instructions on how to order a copy of your credit report from the major credit bureaus, visit Experian.com, TransUnion.com, and Equifax.com.