Your Credit Report
A Credit Article Contributed by Barbara Gibson
Your Credit Report
Your credit report gives creditors information about your credit history. Creditors use the report as a tool for credit making decisions. Credit reports contain information about your bill paying habits, employment stability, and debt to income ratio. The information in your credit report is assigned a grade or score, which objectively predicts how likely you are to use credit responsibly. Creditors use this information to determine if they will extend credit to you.
Credit reports also help creditors decide the terms of any credit that may be extended to you. For example, if your credit report reflects late payments, a creditor may decide to offer you credit at a higher interest rate. You will pay more for the privilege of credit if you carry a balance. Over time, credit extended at higher interest rates can cost thousands of dollars more than credit extended at a lower interest rate.
Reviewing Your Credit Report
You should check your credit report at least once each year. When you receive the report, it is important to make certain that the information it contains is correct. If you discover errors, you must report them, in writing, to the appropriate creditor. Reviewing your credit report can help you determine if there are problems you need to address before you apply for a home loan or credit card. You may also want to review your credit report if you have been denied credit recently.
Creditors are required by law to provide a specific reason for the denial. In addition to late payments, other things that reflect negatively on your credit worthiness include: credit balances that are very close to your credit limit; a short credit history; and many recent applications for credit. It is best to correct the problem before making any other applications.
There are three credit reporting agencies that collect and compile information about your credit history. These agencies do not deny or extend credit. They simply provide information to creditors.
Credit Reporting Agencies
The agencies responsible for collecting information about how you use credit are:
Equifax:(800) 685-1111
Trans Union: (800) 916-8800
Experian: (888) 397-3742
If you have been denied credit within the last 60 days, you are entitled to a free copy of your credit report. You may also purchase a copy of your credit report for around $9.00. Some states, such as Georgia, also provide for one free copy of your credit report each year.
Improving Your Credit Report
Your credit report is assigned a score. Your credit score can be improved with time, patience and changes to your budgeting and spending habits. Improving your credit score will save money on interest and fees, and may even determine whether you will be a lifelong apartment dweller or a home owner. One of the best ways to build a strong credit report is to pay your bills on time. Many banks now offer free online bill pay services to make managing and paying your bills easier.
If you choose to pay your bills by mail, make sure to mail your payments 8 to 10 days before the due date. It is helpful to use an accordion file and calendar to keep track of envelopes, stamps and due dates. If you know that you will be unable to pay at least the minimum by the due date, call the creditor to make arrangements as soon as possible.
