One of the best ways to build good credit over the long term is to avoid the small and large mistakes that can stain your credit report for years.
Pay all of your bills, loan installments and credit card payments on time. Not only will you pay a fortune in late fees -- most credit cards charge over $30 for late payments -- but lenders will raise your interest rates for future credit [source: Willis].
Evictions are doubly nasty. If you're evicted, a collection agency will typically come after you for any back rent. That collection agency will report to the credit bureaus, meaning negative information will now be on your credit report for seven years. Evictions will also show up on tenant screening reports, making it difficult for you to rent future property or secure a mortgage on a future home [source: Sweet].
Avoid bankruptcy at all costs; it's the credit equivalent of poison. Bankruptcies will mar your credit report for 10 years. Above all, do your best not to cross paths with the law. Criminal convictions stay on your credit report forever (yes, forever). Even arrests that don't lead to convictions will appear on your credit report for seven years [source: FTC].
For lots more information on credit, debt and credit reporting agencies, follow the links below.
Related HowStuffWorks Articles
- AuWerter, Stephanie. "Keeping Score." Smart Money. February 28, 2008 (June 3, 2009)http://www.smartmoney.com/personal-finance/debt/keeping-score-13273/
- Bills.com. "How to build credit." (June 3, 2009)http://www.bills.com/blog/how-to-build-credit/
- Burt, Erin. "Seven Steps to Stellar Credit." Kiplinger.com. June 30, 2005 (June 3, 2009)http://www.kiplinger.com/columns/starting/archive/2005/st0630.htm
- CNBC (via YouTube). "The 'Parallel Universe' of Credit Scores." (June 3, 2009)http://www.youtube.com/watch?v=Jb8FdQDBt-M
- Fair Isaac Credit Services. "FICO Expansion Score: Overview." (June 3, 2009)https://www.ficoexpansionscore.com/Content/About.aspx
- Federal Trade Commission. "Building a Better Credit Report." (June 3, 2009)http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm
- Federal Reserve Board. "Consumer Handbook to Credit Protection Laws: Applying for Credit." (June 3, 2009)http://www.federalreserve.gov/pubs/consumerhdbk/apply.htm
- Federal Reserve Board. "Home Mortgages: The Mortgage Application Process." (June 3, 2009)http://www.federalreserve.gov/Pubs/mortgage/MORBRO_2.HTM
- Grant, Kelli B. "6 Ways to Build Up Your Credit." Smart Money. October 27, 2008 (June 3, 2009)http://www.smartmoney.com/spending/deals/6-ways-to-build-credit/?hpadref=1
- Pulliam Weston, Liz. "9 ways to build credit from scratch." MSN Money. May 9, 2008 (June 3, 2009)http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/9waysToBuildAKillerCreditScore.aspx
- Steiner, Sheyna. "How to establish a great credit score." Bankrate.com. (June 3, 2009)http://www.bankrate.com/brm/news/Financial_Literacy/credit_help/build_credit_score_from_scratch_a1.asp?caret=121d
- Sweet, Maxine. "How being evicted can affect your credit report." Experian. July 27, 2005 (June 3, 2009)http://www.experian.com/ask_max/max072705c.html
- Taylor, Don. "Right card can help build credit history." Bankrate.com. (June 3, 2009)http://www.bankrate.com/brm/news/DrDon/20070530_secured_credit_card_a1.asp
- Ulzheimer, John. "Ask John: Retail Credit Cards." Credit.com. (June 3, 2009)http://www.credit.com/rs/vol14.jsp
- Willis, Geri. "Sidestep credit card fees." CNN Money. April 2, 2007 (June 3, 2009)http://money.cnn.com/2007/03/08/pf/saving/toptips/index.htm?postversion=2007040213
Where could you get a copy of your free credit report and do you do with it? Where can you get your free credit score? Find out at HowStuffWorks.