Credit Reports

Anyone who has ever applied for and/or received a credit card or loan has a credit history. This credit history, kept in a credit report, contains information that creditors use to determine whether or not to issue you additional credit and at what interest rate.

The only thing between you and good credit is your credit report. Make sure it contains accurate, complete, and up-to-date information about your borrowing and repayment activity.

What You Should Know about Your Credit Report

The first step in understanding your credit report is to know that it exists. Many people fail to realize the importance of the information that their credit report contains.

In addition to your name, address, Social Security number, and credit card or loan account numbers, your credit report contains information on whether or not you’ve ever been sued or arrested, filed for bankruptcy, or failed to pay your bills on time. In addition, it shows whether anyone else has viewed your credit report, such as a bank or credit card company, and when.

There are currently three consumer-reporting companies in the country – Equifax, Experian, and Trans Union. Federal law allows you to order one free copy of your credit report from each of these agencies every 12 months. Visit the Federal Trade Commission website for more information on how.

Your credit report paints a picture of your financial health. Based on your credit report, each consumer-reporting agency determines your FICO (Fair Isaac Corporation) score, a number between 300 and 850. The higher your rating – the better your credit – the lower your interest rate.

Obtain and Review Your Credit Report Regularly

In order to receive your free credit report, you will need your name, current address, Social Security number, and birth date. Additionally, you will need your previous address if you have been living at your current location for less than two years.

Reviewing your credit report annually is the best way to protect yourself against:

  • Identity theft
  • Potentially damaging errors
  • Inability to obtain credit

By knowing what your credit report contains you can ensure the accuracy of the information being shared with financial institutions and lenders, and put yourself in a better position to get future credit.

Take Steps to Improve Your Creditworthiness

Based on the information in your credit report, lenders determine how risky it is to extend you credit. However, even if you’ve had problems in the past, you can improve your creditworthiness by taking the proper steps.

Look at your ratio of debt to available credit. Having a number of credit cards with high credit limits may seem like a good thing; however, while it affords you the opportunity to spend more, many lenders will see it as risky. Even though you haven’t used the credit, knowing it is there and available may be a concern.

However, don’t start closing your unused credit card accounts just yet. Having fewer open accounts may actually lower your credit score. Lenders typically like to lend to people who use their credit.

On the other hand your FICO score takes into consideration your available credit. So getting close to your limit may send the wrong message as well. If you have a number of high balances, start paying off the credit cards with the highest interest rates and balances.

Don’t apply for credit unless you need it. It is not helpful to open credit accounts you aren’t going to use. Too many cards might signal a high risk. Besides, each time someone requests your credit report, it is noted in your file. Too many requests may signal you’re looking for credit and can lower your FICO score.

Patiently build your credit history. In the field of credit, longevity counts. Well-managed, long-term credit histories typically lead to lower risk. That doesn’t mean someone with only a few years of credit history is automatically a bad risk. Just know that it may take a few years to build the kind of credit history that you can be proud to have.

Reviewing your credit reports and understanding how credit works is an important step toward becoming financial independent. Be sure to stay alert and manage your credit and credit reports responsibly.


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