Send to Friend
Maintaining Credit History
While it is important to establish a credit history, it is even more important to maintain a good credit history throughout your life. Your credit is based on a lot of factors such as payment history, length of time you have had credit, outstanding balances and loans.The following tips will help you maintain good credit history:
- Don't keep too many credit cards or other lines of credit open. Every time you apply for a loan or credit, your credit score is reduced by 10 points.
In the U.S. there are three major credit bureaus: Equifax. Experian (formerly TRW), and Trans Union.
They collect information about you from prior creditors and lenders and they sell
that information to future creditors and lenders. That is how they make money.
You can get a free credit report from each of the credit bureaus once a year. You can visit AnnualCreditReport.com to order your free credit report, which is a central online portal of all 3 major credit bureaus. However, free credit reports do not show your credit score. You may be able to order the credit reports, including credit score and other additional information, for a one time fee.
You must review your credit report carefully. Credit reports generally show any credit cards you have and their limits, your payment history indicating late payments, any loans you have and their payment history, any delinquent payments, any payments that went to collection agencies, and any court dealings, such as divorce, liens, bankruptcy, etc. All negative items stay on your credit report for 7 to 10 years.
If you see any discrepancies, contact the creditor immediately and try to get it corrected. Also, contact the credit bureau to dispute the information. It is best to have it corrected as soon as possible. However, credit bureaus often refuse to correct the information based on the data you provide and require that your creditor contact them. This can be a long, time consuming, and frustrating experience.
You may also notice that there are various spellings or versions of your name in your credit report. This is due to incorrect information being entered into your report by employees. This is usually not a problem. However, when taking out a big loan, such as a home mortgage, a lender may ask you to sign an affidavit that certifies that Name A, Name B, Name C, Name D and so on are the names of one and the same person.Your credit score reflects your individual behavior regarding managing your finances, especially borrowing and repaying. There are many factors that affect your credit score. Some of them are:
- Number of credit accounts
Many people with little or bad credit history may avoid buying a house because they think they may not be able to get a loan. However, many lenders are willing to offer loans because your house serves as excellent collateral for the loan they give you. Therefore, if you are not able to pay your mortgage on time, they can foreclose your home, sell it, and raise money.
However, lenders are in the business of lending money. It is too cumbersome and expensive for them to foreclose on a home, sell it, and raise money. In recent years, many lenders gave loans to people who barely qualified. Due to this, many houses were foreclosed upon. This situation is called a lending crisis. In the summer of 2007, financial institutions like Fannie Mae, Freddie Mac, and the government have become very strict in approving home loans. Many people who would have qualified for a home loan easily a couple of years ago no longer qualify.
You can increase your chance of getting a home loan if you have a large down payment.
If your identity is stolen, the thief can access your credit cards, get loans and never pay them back. That would completely ruin your credit history.
In order to prevent identify theft, you should shred your financial documents or any private information rather than just throwing them in the trash.
You can also buy identity theft prevention services like LifeLock who take several preventative measures, like ordering your credit reports, placing fraud alerts in your credit report, and other related services. They charge an annual fee.