How to attain an impressive credit report

The perfect credit report is somewhat of a myth, just like Santa Clause and the Easter bunny. In fact, all three have something in common: the younger you are, the more you believe in each. Young adults tend to believe that by simply paying bills on time, they will have a perfect credit report, which in turn will open many doors. However, that simply is not true. There are many components to creating a great credit report, however, a perfect one is impossible.
A great credit report is the envy of many borrowers, as these elites receive the best rewards programs, qualify for the largest loans, obtain the lowest annual percentage rates, and incur the least fees.

The foundation of every credit report is the section entitled payment history, which lists any negative payment practices over the past seven years. A good credit report will have no listings within this section. Defaults, late payments, liens, repossessions, judgments, and settlements are nowhere to be found on such credit reports.

A “well-aged” credit report is also fairly important, as a 20-year-old account with on-time payments holds more significance than a 5-year account with identical payment history — hence parents usually have superior credit when compared to their adult offspring.

Borrowers with the greatest credit reports also tend to have a diverse set of accounts. Credit usually falls into two different categories: instalment accounts, which are closed-ended and with fixed balances, such as car loans and mortgages; and open-ended, revolving accounts such as credit cards, in which the balance changes frequently. Making timely payments on each of these accounts proves financial competence and reliability.

The few borrowers with the highest credit scores tend to have a mortgage, a car loan, and a number of credit cards.

The best credit reports also have a limited number of credit inquiries. On the surface, this seems to be something of a double-edged sword — how can a consumer have multiple credit accounts without incurring multiple credit inquiries? The answer is that borrowers should refrain from opening multiple accounts within a short time period, and only apply for accounts that are desired and will be used. Applying for multiple lines of credit quickly implies the applicant is strapped for cash, which raises red flags for lenders and therefore take a toll on credit reports.

Essentially an applicant with a great credit report will not need to constantly apply for credit as their borrowings, as well as their repayments, are under control.

Though a perfect credit report is a myth, a great credit report is very possible, permitting credit users sustain a long and impressive payment history, attempt to keep credit accounts open as long as possible, maintain a diverse set of accounts, and limit credit inquires.