All About Your Credit History

It's important to keep your credit history in as best shape as possible. If there's any blemishes, work to try to fix them. Your credit history is vital because it's your financial reputation, but in the form of a scoring system. When you apply for a credit card, or any other loans, the bank loaning to you investigates you to see how likely you are to pay your debt.

To determine your worthiness of a loan, companies will check your credit report and see how likely it is that you will repay your debt by investigating the three C's of credit. The three C's of credit are capacity, character, and collateral.

Capacity is how much money you can borrow. Is is your ability to repay based on your income, and existing debt.

Character is based on how trustworthy you are. Things like how long you've been employed, and if you pay your bills on time apply here.

Collateral refers to any assets you have that prove you're financially stable, such as a home or bank accounts.

Make sure you stay up to date on your credit history. Sometimes credit reporting agencies make mistakes and you don't want someone elses financial business to become yours. Errors you cause will stay on your record for up to 7 years. Even worse, bankruptcy stays on your report for up to 10 years.

Financial advisors say you should check your credit history every one to three years. You can do this by contacting one of the three main credit bureaus, also referred to as consumer reporting agencies that banks, credit card companies, and stores report delinquent accounts to. These agencies keep track of American consumers and how they use credit.

Some reports vary from agency to agency because not all businesses report information to all three agencies. It's smartest to request a report from all 3. If you apply for credit and are turned down, you have 30 days to request a free copy of your credit report. Otherwise agencies charge a small fee for copies of your report.

The three main credit bureaus are Equifax, Experian, and Transunion.

To help build your credit you can consider applying for a secured credit card. By playing a deposit down as collateral, you receive credit usually based on the deposit amount. A lot of times banks will extend even more credit than the secure amount. My first secured card was a $99 deposit with a $500 credit limit.

Even after you have secured a credit card some companies will continue to monitor you credit to look for any mistakes on your part. A late payment to another company can result in a rate increase from another.

Credit reporting agencies keep track of every company that makes inquiries on your credit report. Some companies will decline your application if they believe you are trying to open too many accounts and can't afford them all.

Don't open too many accounts, but having a few open credit accounts is good for your overall credit history. It shows you can manage credit well, and are therefore a good choice to lend to.