Your credit report is a real-time detailed analysis of your current status. Credit reports help both you, as the consumer, and lenders to review your credit standing. Keeping your report “clean” is important if you are seeking new loans or lower interest rates. The report contains information about you, how much debt you owe if you pay your bills timely and if you have any bankruptcy, foreclosure or lawsuits related to your credit.
Pay your bills on time.
Most lenders and credit card companies offer a grace period in which you can pay your bills after the due date, with penalties such as late fees. However, if you do not pay within the grace period, creditors will report this delinquency to the credit reporting bureaus. Your credit report will also show if you have paid bills timely.
Maintain a proper income to debt ratio.
Do not accrue too much debt, max out your credit cards or carry large balances on your credit cards. Having a large amount of debt reflects negatively on your credit report and may stop lenders from issuing new credit or raise your interest percentage when the opportunity legally presents itself. Your report will show the amount you owe on each debt and too much will appear as an overextension of credit.
Check your credit reports.
Check your credit reports with the three major credit reporting bureaus at least once annually. Mistakes and identify theft do happen and if you find a negative error on your report, you can file a dispute. Depending on the misinformation, you will need to work with the credit agency among others to get your credit report amended.
Contact your creditors/lenders
Call your creditors and lenders when you are having difficulty paying your bills on time. Instead of not paying your bills and loans and risking tarnishing your credit report, ask creditors if they would restructure your payments into something you can afford. Other alternatives such as debt cancellation are possible options, but will negatively impact your report. However, this option is not as damaging as bankruptcy or foreclosure.
Establish some debt if you have none.
Even if you pay for everything in cash and have no outstanding loans, you should maintain a credit card payment this balance off each month. The longer your credit history, the better this will reflect on your report. Having no credit is considered unfavorable when applying for credit, as creditors do not know how much risk you may pose.