Adding Positive Credit History to Your Credit Report

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If you have bad credit or no credit, your goal is undoubtedly to build a positive credit history. It’s not magic. KLH49 / Getty Images

A positive credit history is more important than ever. You need to have good credit to get a mortgage, rent an apartment, buy a car, get a good insurance rate, and sometimes even to get a job. More businesses will probably make the argument that they need to check your credit history before doing business with you.

If you have bad credit or no credit, your goal is undoubtedly to build a positive credit history.

It’s not magic. You can’t directly add things to your credit report. Instead, you must depend on your creditors and lenders to send updates to the credit bureaus based on your account history.

There are three major credit bureaus: Equifax, Experian, and TransUnion. Creditors you do business with may only report your credit history to one of the bureaus based on their existing relationship with that bureau. Bureaus don’t share information with each other under normal circumstances so there’s a chance some of your accounts may only appear on one credit report.

How a Positive Credit History is Built

Every month or so your credit card issuers and lenders send an update of your account status. They tell the credit bureaus your current balance, payment history, and other details about your accounts. I it’s this information that helps build a positive credit history, assuming your account details are positive.

That means timely payments and healthy credit card balances.

It takes time to add positive information to your credit report so don't expect it to happen overnight, or even in a few weeks. You can help the process by being patient and financially responsible.

What If You Have No Accounts?

You need open, active, positive accounts to build a positive credit history.

If you don’t already have open accounts, you can try applying for the types of credit cards or loans for people with no credit or bad credit, like a secured credit card or retail store credit card. And, if you can’t get approved on your own, a relative or friend may be willing to co-sign for you or make you an authorized user on one of their credit cards.

Use Your Accounts the Right Way

While you’re trying to build a positive credit history, you want to avoid the things that will hurt your credit. This includes late payments, high credit limits, and too many credit card applications.

Start small. Expect to get only small credit limits and loans, in the beginning, i.e. less than $1,000. Creditors and lenders will be willing to extend more credit to you once you’ve shown that you can be responsible with a little bit. Don’t use up too much of your available credit and pay back what you borrow on time each month.

Accounts That Are Inaccurately Reported

If your credit report contains negative accounts that should be positive, you can use the credit report dispute process to have the information corrected. For example, your credit report may show that you were late on a payment that you’re certain you paid on time.

To correct credit report errors, you need to send a dispute letter to the credit bureaus citing the error and providing a copy of any proof that shows the information is indeed incorrect.

The bureau will investigate and revise your credit report if the investigation supports your claim. If not, you can follow up with a dispute directly with the business that reported the error.

Some Bills Don’t Help Your Credit

Not all the bills you pay each month get reported to credit bureaus regularly. For example, your cell phone, cable, and auto insurance payments don’t help build a positive credit history, even when you pay on time.

However, if you default on these payments (by becoming several months delinquent), the late payments could be added to your credit report and hurt your progress toward building a good credit score.

Watch out for credit repair scams and ploys about improving your credit score. Credit repair companies don’t have any privileges with your credit history that you don’t also have.

Building a positive credit history isn’t as hard as it seems. Open up an account and pay the bill on time every month and you’re building a positive credit history. Give it some time and, with time, you’ll be able to afford bigger credit card limits and loans.