Establishing the Good Credit Report You Deserve

Establishing good credit is crucial in our modern economy.  Traditionally, a credit report was only a factor in determining credit worthiness when you applied for a mortgage, loan for major purchases, or a credit card.   Nowadays, your credit affects you financially almost daily, whether you are purchasing a cell phone, having your utilities connected or even buying insurance.  Having a good credit report can make a difference and allow you to avoid paying large deposits and higher premiums.  By establishing the good credit report you deserve, you can avoid the penalties that plague other people with bad credit.

The simplest action that you can take immediately to establish good credit is just to pay every bill you have on time, every time.  A common misconception seems to be that if a bill is not a loan or credit card, then it doesn’t matter if it’s paid late.  This is simply not true.  Although it’s true that utility companies and cell phone providers do not regularly report paid accounts to credit agencies, they do report unpaid accounts to collection agencies.  In turn, these collection agencies do report unpaid accounts to the credit agencies that track your credit report.  This is the process of how accounts sent to collections will end up as a negative mark within your credit report.

Paying each and every bill on time is the largest key factor that you have direct control over to establishing the good credit you deserve.  The punctuality in which you pay your bills proves to lenders that you are credit worthy and less of a risk than someone with bad credit.  Once you have established yourself as credit worthy with good credit, you will be rewarded with interest rates that are lower than if you had bad credit.    

It may be difficult to pay off the entire balance on your credit card each month.  However, all that you really need to pay is the scheduled minimum amount due on each card.  Do not skip one credit card payment or pay an amount less than the minimum amount due.  Whenever you pay an amount that is smaller than the scheduled minimum payment due, even if it is on time, the lender will report your account as delinquent to the credit agencies for that particular month.     

It is also crucial to always keep track of the current balance and limit on every credit card, just as if it were a checking account.  Just as you do not want to run a negative balance on your checking account, it is worse to go over the credit limit on any credit card.   Whenever you exceed the maximum credit limit, you are assessed an over-the-credit-limit fee.  The fee must be paid along with the scheduled minimum payment due, which can make it more difficult for you, or again the lender will report your account as delinquent.  However, even if you pay the fee, your credit card account will be reported to credit agencies as having gone over the credit limit.  This will also cause a negative mark in your credit history, even if you paid it on time.  Future lenders will view going over your maximum credit limit as an incapability to responsibly manage credit.

You should also determine if you have a credit card that you are not actively using, or do not foresee using in the future.  Any such credit card should immediately be paid off, if it isn’t already.  It should then be canceled as soon as possible to continue establishing the good credit report that you deserve.