A solid credit history can be one of a person’s most useful and powerful financial assets. A record of prudent credit use and prompt payments can enable you to not only qualify for credit when you need it, but it may also enable you to reduce your borrowing costs.
There are three main credit agencies that gather financial information on individuals and make that information available to lenders: Equifax, Experian and TransUnion. The information the credit agencies compile includes a great deal of basic data, such as age, Social Security number, current and previous addresses, employers and marital status.
Credit reports also include information from the financial services firms you have borrowed from, including banks, credit card issuers, mortgage lenders and others. Your credit report includes all the credit relationships you have had, the date they were established, maximum allowed credit in each instance, 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 in a credit report that can hurt you
- Filing for bankruptcy
- Too many credit cards
- Too many applications for credit
- Late payments
- Increasing credit card balances
- Several credit cards with balances close to their limits
How to monitor your credit report
You should monitor your credit reports regularly to ensure they are accurate and up to date. Under federal law, you are entitled to receive one free copy of your credit report from each credit reporting agency each year if you ask for it.
However, in the wake of recovery from the pandemic, the three credit reporting agencies are offering access to credit reports on a weekly basis at no cost for the remainder of 2022. You can access those reports by visiting www.annualcreditreport.com.
Since not all businesses report to all three credit reporting companies, the information on your credit reports may vary. For that reason, it’s important to monitor the credit reports maintained on you by all three agencies.
Ensure your reports are accurate
If you see an error on any of your reports, be sure to contact the credit agency in writing. Point out the error and ask that it be corrected. Negative information generally remains in your credit report for seven years and bankruptcies may remain for 10 years. However, most lenders pay particular attention to your most recent couple years of activity.
Being aware of your credit report and what it says, making sure it is accurate, working to improve your credit characteristics, and understanding the importance of your report can all help you ensure credit will be available when you need it.
Equal Housing Lender. All loans and accounts subject to credit approval. Terms and conditions apply.