How to Establish a Good Credit Report

If you want to buy a new home or finance an automobile, a good credit report is essential. Yet, establishing good credit or increasing your credit score isn’t always easy. Several factors influence credit, and if you don’t understand how credit score works, it may be difficult to boost your low score.

Things You'll Need

• Free credit report
• Debt statements

Instructions

1. Keep old credit accounts open. In an effort to eliminate the temptation to spend or buy items with credit, you may decide to close a few old accounts. However, if you want to establish and maintain a good credit report, keep old accounts. Closing an account decreases your credit history, which can lower your credit report score.

2. Pay off old debts and collection accounts. Old debts don’t disappear. Even if the creditor stops mailing statements and other correspondences, they’ll report the debt to the credit bureaus. To boost your score and have a good credit report, contact these creditors and setup a payment arrangement.

3. Stop applying for new credit. Every time you apply for a new credit account, an inquiry appears on your credit report, and it stays on your report for two years. In addition, each inquiry can reduce your credit report score by 10 to 20 points.

4. Decrease your total debt balance. Your debt amount can negatively impact your credit score. If you have several accounts near their limits, outline a plan to reduce these debts and lower your debt to income ratio.

5. Dispute credit report inaccuracies. A seemingly minor credit reporting error can lower your score and prevent you from obtaining future credit. Order an annual report and look for unfamiliar accounts and errors.