Building Credit: Easy Steps To A Better Credit Score

Introduction
Buy a home, drive a nice car, apply for a small business loan -- an impressive credit report bodes well at these turning points in life. The first step to improving your credit is being informed about your financial standing. Once you understand what items are in your credit report you can then work on removing the negative ones. Adding positive items to your credit report is also very important, especially if you have little to no credit history. These few steps should allow you to see an improvement in just 3-6 months. Maintaining good standing in your accounts (both bank and credit cards) will greatly improve your score.
Request Your Report
First things first, where can you go to find out where you stand? There are many sites out there that offer free credit reporting once a year. One of the most popular is FreeCreditReport.com. There are 3 credit reporting agencies that companies use in retrieving your credit report: Experian, Equifax, and TransUnion. Each company's website offers a free trial to show their version of your credit report. Yes, their "version" meaning sometimes one might report something slightly different or not at all. So it is important to check all three versions to ensure accuracy of the information.

It is a common misconception that looking at your own credit report reflects negatively on you and your credit score. This is an absolute fallacy. When you check your own credit report it is known as a "soft credit check" and it is NOT recorded in your credit report nor does it reflect negatively on you in any way. Checking your own credit report is a good thing, and I recommend you do it at least once a year.


Remove Negative Items
There are several factors that could possibly reflect badly on you in your credit report. The most well-known negative element is bankruptcy. Bankruptcy will stay on your credit report for 7-10 years. Avoid filing for bankruptcy at all costs. The easiest way to do this is to be financially responsible. Don't apply for loans you might not be able to pay back on time and charge anything to your credit cards if you don't have the cash on hand to pay more than the minimum monthly payment. Divorce also reflects badly on your credit report. One of the easier things to remove from your report is a revolving account. Limit yourself to one savings and one checking account each at the same bank. If you have more than 2 or 3 credit cards, then you should strongly consider consolidating your current balances into just a handful of cards. Too many revolving accounts look bad on your credit report, even if they are all in good standing. If you apply for a loan or credit card and you are rejected, do not apply for another one for several months. You are actually less likely to be approved once the rejection appears on your report, and having multiple rejections is very unattractive to others viewing your report. Work on improving your credit and then go back and apply if you still feel the need.

Add More Positive Elements
Now here are some positives that you can add to your credit report. If you currently have little or nothing in your credit history, then I would suggest getting a retail charge card (e.g. an Ox Publishing credit card). One good thing about a retail line of credit is that you cannot use it one a whim. You are only able to use an Ox Publishing charge card to buy books published by them; therefore, you won't use it for an impulse buy, but it is a great way to carefully build your credit. Most popular clothing stores also offer a credit card, but I wouldn't suggest these for most people because clothes are often an impulse buy.

Maintain Good Financial Standing
Monitor your credit report carefully. Each of the aforementioned sites offers constant credit monitoring for a nominal monthly fee. You may also want to check with you banking institution. If your bank offers online banking, they likely also offer credit monitoring.

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Equifax
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