How To Improve Credit History In 3 Simple Steps

How to improve your credit history is a very important question. One of the key criteria banks and lenders use to calculate your credit score is your credit history.

If you do not have one then it becomes very difficult for banks to determine how to predict your behaviour when it comes to using credit.

This makes you an unknown entity and this can increase your chances of having loans or mortgage applications rejected.

If you've recently being discharged from bankruptcy or have accumulated a lot of bad credit then your credit score will have been lowered considerably. This puts you in a distinct disadvantage as borrowing will become a more complicated and expensive affair.

If you have a poor credit history or do not have one at all you will need to look at how to build your credit history as soon as possible. Fortunately, there are a variety ways that you can do this and the following are a few strategies that you can consider:

1. Review Your Credit Report

The credit report is a very important document that you should take the time to learn and understand. There are a actually three reports as separate ones are produced by the three major credit reporting companies. These companies are Experian, Equifax and Transunion.

If you have been denied a loan, job or insurance in the last 60 days you have the right under federal law to obtain a copy of your credit report for free. Contact each company and request a copy of your report.

The reports will contain information relating to your personal details, employment history, credit accounts, outstanding balances. The report can also include negative records that can lower your score such as missed payments, defaults, foreclosures etc.

When you receive your reports check them carefully. Verify that your name is spelt correctly and that your address is recorded accurately. Ensure that records relating to your credit history or correct and up to date. You have the right to dispute anything that you consider to be inaccurate and that you can back up with proof.

The credit collection rating agency has to review your case within 30 days of receiving your dispute letter. If they approve your findings they will amend and sent you a new copy of your report.

2. Get Yourself A Secured Credit Card

Many people contemplating how to improve their credit history after bankruptcy will have to realize the reality that there choices of obtaining credit will be greatly reduced. This is a major obstacle because to improve your credit score you need to build a solid payment history and you can't have one without the other.

However,this does not mean that they will never be able get a loan in the future as there is always a way. All you have to do is prove to financial lenders that you are a good credit risk and the only way you can do that is to borrow again.

For people with bad credit or coming out of bankruptcy secured credit cards are a quick way of rebuilding credit history. Secured credit cards are different from normal cards because the card holder has to put up their own cash as security to use the card. The amount of cash that is used as the secured deposit becomes in most cases the credit limit.

When you apply for a secured card make sure the card provider reports transactions to each of the 3 credit bureau agencies. This is essential to improve your credit history. You must use the secured credit card responsibly by paying off the outstanding debts in full before they are due. Avoid the minimum payment if you can as the credit card interest can be higher than normal cards.

Continue buying what you can afford and pay off in full until you build up a good credit record. In general this should take about 12 to 18 months depending on your financial circumstances. By this time you should be able to apply for normal credit cards that have lower interest rate charges. There are many companies providing these cards including Citibank, Capital One and Bank of America.

3. Keep Your Debt Levels On The Low Side

One factor that can have a negative effect on your credit score is having a higher debt to credit ratio. This simply means that you are carrying too much debt. Many people are tempted to spread their debts across several credit cards.

This was fine in the past but lenders are becoming smart to it. The best strategy is solid financial planning, learning how to budget and paying off your debts and bills as fast as you can.

Another key factor is to keep within your credit limits. Most people know this however, they think that just spending under their limit is good enough. Not exactly, as this could also lower your fico score. It is better practice to keep within 30% of your limit. As an example, if your limit is $4000 then, you do not want to exceed more than $1200 on the card.

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