Maintaining Good Credit
A big part of maintaining good credit is keeping your eye on the ball. Making payments on time, checking your credit report regularly, and fixing errors quickly are as important as balancing the type and amount of credit you carry.
How to Check, What to Look For
The three primary credit reporting companies — Experian, TransUnion, and Equifax — are required to give you a free copy of your report once every twelve months if you ask for it. Take best advantage of this by ordering your report from one company at a time and stagger your requests out across the year. This way you'll get a look at your file more frequently and will catch any wrong or fraudulent information more quickly. Reports are available through
As a memory hook, check your credit report through
The report itself will guide you on how to correct errors. Check your personal profile, addresses, work history, accounts, and payment history. Look for anything that doesn't seem to be yours. Old accounts that suddenly have a payment due, incorrect addresses, payments that weren't credited, other social security numbers, or strange names connected to your account could indicate fraud.
The credit report is a list of all your accounts; while you have everything listed in one place, take the opportunity to clean up your record. Close all but two or three credit card accounts. (You'll need to pay them off first, of course.) Keep at least one long-held card because the length of your credit history matters. Minimize the credit lines on your credit cards and make sure they are correctly reported on your report. Credit card companies often increase your available credit line without your request. High credit card limits — even if you haven't borrowed against them — can reduce the amount a mortgage or auto loan lender may be willing to offer.
Don't close your credit card accounts or minimize your credit lines if you're working on paying your cards off. Keeping the ratio of the amount of credit used to the amount available is important. Also, banks recommend that you don't close cards too closely to applying for a loan. This extra activity could raise a red flag to a lender.
When Report Data Is Wrong
Maintaining a watch over your credit file is important because errors or fraud can have a dramatic negative effect on your financial health without your even being aware of it. Many credit card companies and some other lenders will increase the interest rates on accounts you have with them if a late or missed payment is reported on another account.
Credit reporting agencies want their information to be correct. Unfortunately, they are only information collectors; they rely on their sources of information — sources such as court filings, real estate records, reports from lending and credit card companies — to be accurate. A mistake in a record will show up in your report. The Fair Credit Reporting Act, available at
Good and Bad Credit
The type of credit you have and how you use it is as important as making on-time payments and not maxing out your credit card limits. Check through your credit report and make sure you've considered the following:
Keep your credit card balances low — account balances are reported to the agencies at the end of each month. Even if you're paying the balance off each month, if the balance on the statement is large it could negatively affect your score.
Use an old card — accounts that you've stopped using will stop being updated at the credit agency. Pull out your old card now and then to keep its long history fresh in your report.
Don't apply for new credit if you already have enough — avoid the temptation to chase cards with lower rates by opening new accounts. Each new account is a negative on your report.
If you'd rather use a credit card than a debit card for monthly expenses, you're not necessarily hurting your credit score, as long as you're keeping your balances low. Check your account online midmonth and pay down the balance before the statement closes. Use a couple of different accounts and avoid using more than 30 percent of the limit on each card.
