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What is Your Credit Report and How Important is it?

Your credit report is a detailed record of your past borrowing and repayment habits, compiled by one of three major credit bureaus - Experian, Equifax, and TransUnion.

Whenever you apply for credit from a bank or credit card company, your credit report will be checked before credit is extended to you. Your banks and credit card companies will also report back to the credit bureaus on the payments you make to your accounts.

Your credit report is important in that it can affect your ability to:

• Get a job - more and more employers are checking credit reports before hiring or promoting employees. Government, financial, or jobs requiring handling cash or valuables are most likely ones in which you will be asked if it's ok to check your credit
• Rent an Apartment - Landlords will review your credit before deciding to rent you an apartment. If your credit's bad, you may not be able to obtain a lease, or the landlord may require a co-signer or a higher security deposit.
• Insurance - your credit history may affect your ability to purchase renters or car insurance coverage and help determine what premium you'll pay
• Obtaining New Credit - Buying a new car, house, or any other loan (including student loans) require a positive credit report.

What's a Credit Score and how is it Calculated?

Your credit score is calculated by data collected by the three major credit bureaus - Experian, Equifax and TransUnion. Since each bureau may collect data at different times your score can vary among the three bureaus - if you are applying for a large loan such as a mortgage usually the lender will look at all three reports and take the average of the three scores.

Your score can range from 300-850. Scores above 700 are considered to be good, while scores in the 500-680 range can indicate late payments, collections, or other negative information.

Below are the major components that go into calculating your score:

• Payment History - Creditors look at how you pay your accounts - on time, or late, for credit cards, retail accounts, installment loans like car or student loans, etc. They also look to see if you've filed for bankruptcy or have had collection items, and/or delinquency (past due items). Any missed payments on credit cards or student loans will have a negative impact on your score.
• Amounts Owed - how much you own on your credit accounts and loans, and what percentage of your available credit you use and carry a balance on. Lenders like to see that you use a low percentage of your total available credit available - typically 35% or less.
• Length of Credit History - having had credit card accounts open longer improve your credit score
• New Credit - If you've applied for new credit recently or have had your credit report pulled by creditors for new credit, your score could be lower
• Types of Credit Used - having a combination of what lenders call revolving credit (credit cards, retail cards), and installment loans (auto loans, student loans), will improve your credit.

How can I improve my credit and see my report and score?

Your credit report is a snapshot of your history at the time the report is pulled. Most information, both positive and negative, remains on your report for up to 7 years (bankruptcy can remain on your report for up to 10 years). If you've had problems in the past, below are some ways you can improve your score:

• Pay your bills on time! - since missed payments and collections have a major negative impact on your score, it's important to pay on time and make a habit of staying current - the longer track record you have of o n-time payments will improve your score.
• Keep you credit card balances low - paying down your debt will show to lenders that you use revolving credit wisely.
• Apply for new credit only as needed - too many inquiries in a short period of time will lower your score. Having newer accounts - such as recently getting a new credit card - will impact your score. Having accounts open for longer periods of time will improve your score.

It's a good idea to review your credit report from all three major credit bureaus every year to check for inaccuracies, especially if you are planning a major purchase, such as a car or a new home. Ordering your own credit report does not count as an inquiry and will not affect your credit score.

You can order your report directly from Experian, Equifax or TransUnion. In addition, you can receive one free credit report from each bureau every year by going to www.annualcreditreport.com