Your credit report could hurt you if it isn’t in top shape. What you need to know

Your credit report may be the most important document in your life. That sounds extreme, but it’s probably true. If you need a job, a car, a place to live, or want to make any significant financial purchase or investment, your credit report will come into play. Every single company, lender, employer or creditor that wants to do business with you will want to make sure that you are financially stable, and to find out, they will check your credit report.

So, how do you make sure that your credit report is healthy? Here are a few tips:

Pay your bills. This one seems obvious, but it’s not just about paying your bills; it’s about paying your bills when they are due. The credit report will indicate any delinquencies; particularly any payments that are more than 30 days late. This is a “red flag” to anyone who wants to lend you money. After all, they want to get paid on time, just like everyone else. The best thing you can do when borrowing money or taking out a loan is to make sure that you pay your bills, in full and on time. Minimum payments are fine, if that’s all you can afford. Just make sure that you send something that is acceptable to the lender when the payment is due.

Don’t get in the habit of applying for too much credit. This is often a problem for younger people who are trying to establish credit on their own. If one company turns you down, your instinct is to apply to another and another and another. Many inquiries in a short period of time can put a dent in your credit score and it make you look either financially desperate or financially reckless. Neither one is complimentary; try to avoid seeking too much credit in a short period of time.

Keep a credit history. Just as you don’t want to apply for too much credit, you also don’t want to just open and close accounts on a willy nilly basis. Your history is important - how long you have had credit. It’s important to establish a track record, so you want to keep accounts open for an extended period of time. If it is important to close an account, make sure that you close a newer one, rather than an older one. If you cancel a card you have had for ten years and the only other card you have is two years old, it reduces your history to two years. You don’t want that.

Keep an eye on who is checking your credit, as each inquiry puts a dent in your score. There are “hard” inquiries and “soft” inquiries. A “hard” inquiry is one made by someone to whom you have applied for credit. A “soft” inquiry is one made by a company that might be sending out “preapproved” credit card offers. Hard inquiries have an effect on your score; soft inquiries do not.

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