Developing a healthy credit history is important for many
reasons. A poor or non-existent credit history can hinder your ability to
qualify for a loan, pay lower insurance rates and even get some jobs! Starting with your first credit card
everything you do that involves credit is part of your personal credit history.
To have a beneficial credit history, you have to use credit correctly. But exactly
what is “correct?” Here’s a guide …
Starting Out
If you’re just starting out, begin with one credit card and don't open up too many cards within the
first few years. The more credit you have, the more you may end up using and
the more payments you’ll have to make. What’s more, too many inquiries into your
credit and/or new credit cards can have a negative impact.
Credit
Report
The major credit bureaus keep files on your financial
activities that impact your credit. You are entitled to one free credit report
within each 12-month period from each of the three major credit bureaus. The
bureaus run AnnualCreditReport.com where you can get your free
credit report. Your credit score is available for an extra $10 fee—see below. (Note:
If you dispute something on your report you can request an investigation and/or
ask that a note be included in your file.)
Your
Credit Score
As part of your credit report, your credit history is
“graded” and this becomes your credit score. Maintaining a good credit score is
a key factor in your ability to qualify for loans. How is your credit score determined?
There are several factors:
- Amount of open credit you have available
- Types of credit you have
- Timeliness of your payments
Each credit-reporting agency has a slightly different version
of your credit score, but these ranges will generally apply:
700 – 850: Very good or excellent
680 – 699: Good
620 – 679: Average/OK
580 – 619: Low
500 – 579: Poor
300 – 499: Bad
680 – 699: Good
620 – 679: Average/OK
580 – 619: Low
500 – 579: Poor
300 – 499: Bad
If you are just starting out establishing credit, or need to
improve your credit score, here are a few things to keep in mind:
- Avoid maxing out credit lines on cards or loans.
- Avoid applying for too much credit. (All those department store credit cards could count against you.)
- Consistently make all your payments on time.
- If you carry a balance, pay it down on credit cards or loans.
- Satisfy any overdue bills.
- Let your accounts age. Leave your oldest accounts open since they help increase your credit age and build good credit.
Remember, Bank of Luxemburg will work with each customer on
an individual basis to find the best loan option for you, even if your credit
score is not ideal.
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