Financial Tips

Consumer Credit : Safeguarding Your Credit Report

What Does Your Credit Report Say About You?

Every consumer gained a new power on September 1, 2005. Do you know what that power is? It's the right to request your credit report, every 12 months, without having to pay a fee.

If you have yet to use this power, it is time to take action. Credit reports are your financial report card. Your financial future might well depend on the data they contain.

Credit reports provide information about your spending habits and debt management with lenders, insurance companies and other authorized parties. You need to check that the information in your credit file is accurate and up-to-date. Any negative information could affect your loan rates, insurance rates, and even your ability to land a job.

Reviewing your credit report will also reveal whether other people have fraudulently opened a credit account in your name. In 2006, more than 8.4 million Americans became victims of identity theft. Many victims didn't find out about the crime until they were denied credit or received collection calls.

Credit Counselors urges consumers to get in the habit of checking their credit reports on a regular basis. That way, you can promptly identify, detect and remove any errors, helping to maintain your financial well-being. Credit counselors know from experience that the longer you wait, the harder it is to correct inaccuracies.

You can order your free annual credit report at an official site -- www.annualcreditreport.com -- or by calling 1-877-322-8228. The process will require you to provide your name, address, Social Security number, and date of birth to verify your identity. Request a credit report from each of the three major credit-reporting agencies (Equifax, Experian and TransUnion), as their reporting systems do vary.

Your credit report provides a look at your overall financial wellness. You should also check your credit “temperature,” otherwise known as your credit score. Companies are influenced by your credit score when deciding whether to loan money or provide a service to you. These scores indicate if you'd be a good risk for credit cards, auto loans, mortgages, insurance, utility service and other products.

The majority of lenders rely on the FICO® system, which rates your credit on a scale ranging from 300-850. Consumers with credit scores above 780 typically receive the best interest rates and loan terms. There is no one common score cutoff used by all lenders. In general, the higher your credit score the better for you.

Credit scores are not available for free. You can purchase your credit score for a modest fee when ordering your free annual credit report at www.annualcreditreport.com. Make sure you don't visit a “copycat” Web site that could steal your private information. If in doubt, contact an experienced credit counseling organization for assistance.

If you have a high credit score, congratulations and keep up the great work managing your finances! If your score has room for improvement, Credit Counselors suggests you reconsider your spending and debt management practices.

The following actions may contribute to a poor credit score:

• Missed or late loan payments (It takes 24 months to restore credit with one late payment.)
• Credit cards are maxed out (You've hit the limits on your credit card accounts.)
• Overspending.
• Applying for many accounts in a short time frame.

Life events may also interfere with and could indirectly affect your credit score. These would include:

• A death in the family
• Unemployment or other loss of income
• Medical expenses
• Divorce or separation

Although life events may be beyond your control, you can still take action to improve your credit situation. Don't forget, the scores on your credit reports will determine the outcome of your lifestyle and financial future.

Factors that may help to improve your credit score include:

• Paying down or paying off credit card balances
• Making all payments on time
• Refraining from opening any new accounts
• Building a solid credit history over time

It can take years to turn around a negative credit report. For safe, trustworthy assistance in regaining control of your credit, contact Credit Counselors. Their certified credit counselors can help you analyze your credit reports and learn how to correct errors. If appropriate, they can also offer a Debt Management Program (DMP) to assist you with repaying your debt, obtaining a higher credit score, and regaining your financial freedom.