Credit Basics: Taking Charge of Your Credit Profile

credit basicsYour ability to obtain credit is based on a variety of factors, primarily your credit history. Learning the credit basics can help you take charge of your credit profile, and give you the best chance at gaining new credit.

Credit Basics Step One: Get Your Credit Reports

You may receive a free copy of your report once every 12 months, as guaranteed by Federal Law. Simply go to annualcreditreport.com to get your reports. This is the ONLY site that is specifically authorized by Federal Law to give you your credit reports for free. Other sites may attempt to charge you a fee, or sell you one of their many products.

Credit Basics Step Two: Check Your Personal Information

Do not skip over the personal information area in a rush to look over your accounts. Many reports will have wrong information because they are including the credit history of a person with a similar name. See if your name, address (and previous address) is accurate. Also look carefully as your social security number, date of birth, and employer.

Credit Basics Step Three: Credit Triage

Looking at your accounts from a credit triage perspective will make the best use of your time. Pay the most attention to the accounts that you can change either now, or in the very near future. This will also have the quickest impact on your credit score. For example, reducing your credit utilization to under 30% can bump your credit score up by 50 points or more. Often in a matter of weeks, or even days.

Credit Basics Step Four: Dispute When Necessary

Errors do happen, and unfortunately they’re not a rare thing. If you see an error on account that is still open, you should contact the creditor to resolve it. For errors on older, closed accounts, it is best to direct your disputes to the credit reporting agencies.

Credit Basics Step Five: Focus on Long Haul

Please recognize that obtaining a good credit score is not a once-in-a-lifetime event. You will need to continually practice the good habits that helped you get it in the first place. Once you achieve a good score, you should treat it as one of the more valuable possessions you have. ♦