Credit Bureaus

Credit bureaus issue a credit report that will affect the size of your loan and the amount of interest you will be paying on that loan. The better your credit score is on the report, the more likely you are to be approved for a loan with low interest.

No Credit History

To get a better score, you’re going to have to develop some credit history. If you’re young, or a beginner, and don’t have a credit history, that’s okay. There are steps you can take to get you on your way.

First, you can apply for a credit card. One of the major companies like Visa, Master Card, or American Express would be great. You’ll start with a low limit like $500 to a $1000, but that’s okay. Start making some purchases and paying them off. Remember to only spend what you can afford. Once you have a few months to a year under your belt, you’ll be surprised how quickly other companies will ask you to apply for their credit cards. Also, your current card limit will probably go up.

If you are having trouble getting a major company to issue you a card, you can always apply for a department store credit. Something like a Home Depot Credit Card would work fine as well. Buy one or two things with the store credit card (you may even get a same-day discount) and pay it off as soon as you get the bill. After a few months of this, you may find it easier to get a major credit card. Before you know it, you’ll be platinum.

Bad Credit History

To establish a good credit history with the credit bureaus, it is important to pay your bills. This is where bad credit history comes into play. If you ever get to the point where you haven’t paid a bill or there is a dispute, you may find yourself on the bad end of the phone with a collection agency. Not good for the credit report.

If you find yourself in this situation, it gets a little more difficult. First, you need to see your credit report to determine who is handling the “bad debt” account. Is it the original issuer (company or store) or has the account been turned over to a collection agency? The three major credit bureaus issue a free credit report once a year. Others may charge a small fee. You can contact a credit bureau to see how to receive a copy of your credit report.

Once you know who is handling your payment dispute, the next step is to take care of it to raise your credit score. If it is the original owner of your account, get in contact with them and try to settle the dispute. See whether you can pay it off in a lump sum, work out a payment schedule, or settle the dispute. However, before you send them any money, make sure they take the appropriate action for your credit report. Either mark the dispute as settled or paid. And even then get a letter from them that states the account is settled, so you can prove the account is settled/paid therefore affecting your score in the proper manner.

You need to take the same action if the account is with a collection agency. Make sure you get something in writing before you send any money. You want this account to be settled to improve your score.

When you have paid off a bad debt through either a collection agency or the original issuer, and the right course of action was noted on your credit report, your score should go up. However, it will not return to its original level. The fact that you paid the debt is good, but it will still be noted on your credit report that it was at one time an outstanding debt but is now settled. That notation will remain on your credit report for up to seven years.

Staying in Good Standing with Credit Bureaus

Every bill you pay affects your credit score, so it is important to establish some bills, pay them off, and avoid bad debt. All of this factors into the credit score reported by credit bureaus, which in turn affects the size of your credit and your ability to some day buy that mansion or Jaguar. Good luck.