A credit rating affects many things in a person's life, such as a job offer, opportunities to rent an apartment or buy a house, and the rate a bank charges on a loan. There are three major companies that provide credit ratings in the United States, which are the firms Experian, Equifax and TransUnion. These companies do not provide the exact method that they use to create a credit score to consumers. An individual can still establish a high credit rating by following certain practices.
Use Credit Sparingly
A credit-reporting agency considers an individual's level of credit usage when it assigns a credit rating. If an individual borrows $800 and can borrow a maximum amount of $1,000, this lowers the individual's credit rating much more than borrowing $800 when the individual can borrow $100,000. To receive an excellent credit rating, an individual should only borrow a small portion of the total amount that is available.
Monitor Your Credit Report
The Federal Trade Commission requires credit-reporting agencies to provide free credit reports once a year to consumers in the United States. Examining a credit report can improve an individual's credit rating because the person may find inaccurate charges or unpaid bills. If there are unauthorized charges on a person's credit report, this may be a sign of identity theft, so the individual should report any unknown charges to the credit reporting agency.
Pay on Time
Prompt bill payment ensures that an individual can maintain an excellent credit rating. Many banks offer automatic bill payment, which is useful to ensure that an individual does not miss a recurring payment such as a phone bill or a water bill. Many companies also allow a client to select automatic payments when setting up an account, so the company automatically deducts a payment from the client's bank account when it is due.
Negotiate with Creditors
An individual's credit report includes information that a lender provides to the credit reporting agency. A lender may decide to remove negative information if an individual repays a debt. The Los Angeles County Department of Consumer Affairs website states that a lender must report payments that it receives from a debtor, but there is no legal requirement for a lender to remove other negative comments about the debtor from the credit report.
Consider Credit History Length
The length of an individual's credit history affects the credit rating. Lenders want to see evidence that an individual can pay bills on time over a period of many years. Even signing up for a single credit card will start a credit history for an individual. The Federal Reserve Consumer Information website states that a consumer can still have an excellent credit rating with a short credit history if the consumer manages credit accounts correctly.
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