Reading Your Credit Report

A credit report contains information compiled by a credit bureau from merchants, utility companies, banks, court records, and creditors about your payment history. The information is used to approve credit applications, job applications, insurance policies, and rental housing. It is important to build a good credit reputation because of how influential your credit history is when acquiring new credit.

Building Your Credit History
To build your credit history you can do the following:

• Establish a checking and savings account.
  Lenders see people who handle these accounts as being more likely to manage credit usage properly.
• Have utilities billed in your name.
  The fact that you can maintain a good payment pattern for your utility bills indicates that you can manage your money wisely and will do the same with your credit payments.
• Request, acquire and use a gas credit card.
  These cards are easy to obtain. If one company refuses, simply apply to another company, as companies’ scoring systems differ. Use the credit sparingly, and repay the debt promptly.
• Apply for a bank credit card.
  Your own bank is the best place to start your search for a credit card. If not successful, you usually can find another bank that will issue you a card. The credit limit may be low and the annual percentage rate (APR) high, but at least the opportunity exists to establish a credit history. Later, you can request an increase in the credit limit and a lower APR.
• Ask for a small, short-term cash loan from a bank.
  Putting borrowed funds into a savings account at the bank will almost guarantee that you will make the required three or four monthly payments. In addition, the interest charges on the loan will be partially offset by the interest earned on the savings.
• Pay off student loans.
  Some consumers have their first exposure to credit through the student loans used to attend college. Paying off these loans quickly through a series of regular monthly payments can show prospective lenders that you are a responsible borrower.

What does your credit report contain?
Your credit report contains the following information:

1. Account Information:
• Industry/account type
• Date reported
• Date account opened
• Highest balance or account limit
• Current balance
• Current payment status
• Delinquency history (up to 7 years)
2. Inquiries: This is a list of any company that has requested information about your credit history.
3. Public Record Items: Legal information that may affect your credit rating.
4. Collection Items: Collection agencies assigned to recover outstanding debts.

Monitoring Your Credit
The credit report influences a consumer’s access to affordable credit, so it is important to monitor the report. The Fair Credit Reporting Act requires credit bureaus to provide consumers access to their reports from the three credit reporting agencies, Experian, Equifax, and TransUnion. Consumers can review one report for free annually from each credit bureau on the Annual Credit Report website. This website is the only site that provides the reports for free. Do not use a site that requires you to enter financial information to get the report.

Source: Lorna Saboe-Wounded Head, iGrow