28 July 2012
Building a Good Credit Record

A solid credit history can be one of your most useful and powerful financial assets. A record of prudent credit use and prompt payments may enable you not only to qualify for credit when you need it, but also to get a lower interest rate when you borrow money.

Three main credit agencies gather financial information on individuals and then make that information available to lenders to help them determine whether to make a loan to someone. The information they compile includes a great deal of basic data such as date of birth, Social Security number, current and previous addresses, employers and aliases (i.e. maiden name if married). They also get information on your borrowing history from credit card issuers, mortgage lenders and others. Your credit report may include all the credit relationships you have, the date they were established, maximum allowed credit, current balances, and payment history.

Indications of a solid credit history:

  • Some, but not extensive, borrowing
  • Prompt payment of monthly bills
  • Paying down balances over time

Items that can hurt your credit report:

  • Filing for bankruptcy
  • Too many credit cards
  • Too many inquiries for credit
  • Late payments
  • Credit card balances at or close to their limits

When making decisions to lend you money, lenders may use a credit report, along with evaluating your capacity to repay, your character and any collateral you may put up for security. Many lenders also take these same issues into account in deciding what interest rate to charge or type of loan to offer.

It is important to make sure your credit report is accurate and up to date.  You can get a free credit report once a year by using this website:  www.annualcreditreport.com. You can also get copies by calling the credit agencies or going to their websites, but there may be a small charge unless you have recently been denied credit.

  • TransUnion (transunion.com) – 800-888-4213
  • Experian (experian.com) – 888-397-3742
  • Equifax (equifax.com) – 800-997-2493

If you see an error on the report, you can and should contact the credit agency in writing or online, telling them of the error and asking that it be corrected (filing a dispute). Negative information generally remains in your credit report for seven years, and bankruptcies may remain for up to 10 years. However, most lenders pay particular attention to your most recent couple of years of activity.

Being aware of your credit report, making sure it is accurate, working to improve your credit characteristics and understanding the importance of your report can all help you get credit when you need it.

Click here for more information about your credit report and how to protect your credit from fraud and identity theft.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.


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