Consumer Credit 101: The Basics

(ARA) - Do you know what's in your credit report? Are you sure it's completely accurate? How about your credit score? Do you know what it is or how you can improve it?  Review The Top 10 Things You Should About Credit at the bottom of this article.

If you are one of the 205 million Americans who has a charge account, car loan, student loan or home mortgage, you probably know that your credit history may influence whether you can get a loan and what interest rate you'll pay. However, you may not know who else might be checking your credit report. Landlords, insurance companies, even employers who have a permissible purpose by law may check your credit report to see whether you've handled credit responsibly in the past. A solid record of paying your bills on time may be just the character reference you need to land a job.

Perhaps it's time for you to learn a bit more about this central feature of modern life. First of all, you should realize you don't have just one credit report. Actually, there are three major credit reporting agencies (a.k.a. "credit bureaus") that gather, maintain and sell information about your credit history. These companies -- Equifax, Experian and Trans Union -- collect facts about your payment habits from credit grantors like banks and retail stores; maintain that data in computer databases; and use that information to generate your credit score, which is essentially a statistical summary of the information contained in your credit report.

When you apply for a new credit card or loan, the lender orders your credit report from at least one of the credit bureaus and analyzes the information to decide whether you're likely to repay your debt.

You can -- and should -- check your credit reports to see how you rate and make sure the information in them is completely accurate. By checking your credit reports regularly, you can catch possible inaccuracies and dispute them. For many people, it makes sense to subscribe to a credit monitoring service, which allows you to check your report as often as you'd like.

It generally makes sense to check all three of the major bureaus. While most major lenders report consumer account information to all three bureaus, smaller banks and other credit grantors may report to only one, or even none. Therefore, your credit report might differ from one bureau to the next, and a possible inaccuracy in one might not be found in another. You can avoid the hassle and inconvenience of contacting three separate organizations by using a service which offers credit reports from all three bureaus. Finally, learn more about how you might be able to enhance your credit report and improve your credit score.

There are a variety of online sites that provide useful information on credit reports and credit scores, as well as tips for improving both. For information on credit reports and credit scores, try Credit Matters (http://www.creditmatters.com) and the Yahoo Credit Center (http://loan.yahoo.com/c). CreditMatters also offers comprehensive three-bureau reports as well as single-bureau reports. ConsumerInfo.com (http://www.consumerinfo.com) offers a credit report monitoring service.

Courtesy of ARA

The Top 10 Things You Should Know About Credit

  1. The information in your credit files at the three major credit-reporting bureaus can vary.
  2. You should check your credit report regularly for possible inaccuracies or indicators of possible credit fraud.
  3. Having too many open credit cards can hurt your credit rating.
  4. Potential employers can ask to check your credit report. They must receive your permission to request a copy of your report.
  5. Your credit score can be lowered if you have too many inquiries in a short period. An inquiry is recorded on your report when you apply for new credit, such as a loan or new credit card.
  6. Having an active, long-term line of credit in your name can improve your credit rating.
  7. Inaccuracies can happen. The credit history of another person with your same name, or a similar name, can mistakenly be merged with your credit report information.
  8. Derogatory credit information can stay on your credit report for seven years. Bankruptcies can stay on your report for up to 10 years.
  9. Identity thieves have been known to assume your identity and open a new credit card in your name. They can re-route your credit card statement to their address. They can also make charges to your credit card account without actually having possession of the card. They simply need your credit card number and expiration date.
  10. The last two years of your credit history are the most important in lenders' eyes.

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