Why does my credit report matter?

July 1, 2009

Every day, someone in Acadiana asks the Better Business Bureau questions concerning their credit report. A credit report is a record of your financial behavior, it contains identifying information about you and indicates how responsibly you have used credit and met your financial obligations.

Establishing and maintaining a good credit record is very important. Your credit report is purchased by lenders, employers, insurers, public utilities and others who, as determined by the Fair Credit Reporting Act, have a legitimate need for the information.

A low credit score could deny you access to a credit card, mortgage or car loan, insurance, electric and telephone service, an apartment rental unit or a job. And, it could result in your paying thousands of dollars a year in additional finance charges.

It's important to understand what is in a credit report. First is a personal profile section, which includes your name, other names you were formerly known by, Social Security number, date of birth, current and former addresses, telephone number and the name of your employer.

Another section offers information that is a matter of public record. Previous defaults, foreclosures, garnishments, bankruptcies, tax liens or other legal judgments against you will appear in this section.

A third component is credit history information, which includes a listing of your specific mortgage, installment credit and revolving credit accounts; the date the account was open, the credit limit or loan amount, balance and monthly payment; and whether your payments have been on time, and if not, how many days late.

Finally, there will be an "Inquiries" section that lists any creditors, insurance companies and lenders who have asked for your credit report.

Information in your credit report or credit file is used to formulate your credit score. This number, which can range between 300 and 850, depending on the credit-reporting agency, summarizes your creditworthiness.

Each credit-reporting agency uses a different scoring model so your credit score may vary from agency to agency. Nonetheless, the scoring models are mostly influenced by the following: how you pay your debts and how much debt you owe. When formulating your score, each agency pays close attention to Your payment history: Do you pay your credit accounts on time? Are there bankruptcies or other negative items on your record?

How much you owe: What is the total owed on all of your account? What percent of your available credit are you using? Is your debt load manageable?

The length of your credit history: For how many years have you demonstrated responsible credit management?

Have you recently applied for or opened new credit accounts? Most people have a credit score in the 600s and 700s. Scores above 700 are a sign of financial health and can earn you relatively low "prime" interest rates and favorable lending terms.

You can request your free report online, by phone or by mail. Visit www.annualcreditreport.com, call 1-877-322-8228, or fill out the annual credit report and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. No matter how you request your report, you have the option to request all three reports at once or to order one report at a time.

Source:http://www.theadvertiser.com/article/20090701/BUSINESS/907010308