Three numbers could never mean so much as do the ones that make up your credit score. Key to a healthy financial life, credit can be the make-or-break detail that determines whether you'll get a mortgage, car loan, or a business loan. To make sure you’re building a strong credit history, consider the following tips:
Request a copy of your credit report – and make sure it is correct. Your credit report illustrates your credit performance, and it needs to be accurate so that you can apply for loans – such as a mortgage, car, business, etc.
Everyone is entitled to receive a free copy of his or her credit report annually from each of the three credit reporting agencies, but you must go through the Federal Trade Commission's website at www.annualcreditreport.com, or call 1-877-322-8228. Note that you may have to pay for the numerical credit score itself.
Set up automatic bill pay. Payment history makes up 32 percent of your VantageScore credit score and 35 percent of your FICO credit score. The more you pay your bills on time, the better your score. Avoid missed payments by setting as many of your bills to automatic pay as possible.
Keep balances low on credit cards and "revolving credit." Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. You often can increase your scores by limiting your charges to 30 percent or less of a card's limit.
Apply for and open new credit accounts only as needed. Keep this in mind the next time a retailer offers you 10 percent off if you open an account. However, if you need a new line of credit, don’t jump at the first appealing offer; compare rates and fees offered through mail solicitation, on the Internet or at your local bank.
Don't close old, paid off accounts. According to FICO, closing accounts can never help your score and can in fact damage it.
Talk to credit counselors if you're in trouble. Using legitimate, non-profit credit counseling can help you manage your debt and won't hurt your credit score. For more information on debt management, contact the National Foundation for Consumer Credit (www.nfcc.org).