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Guide to Credit and Credit Reports

A few facts about credit that will help guide you through the process:

  1. A good credit history is a very important aspect of financial health. It enables you to quickly get the credit you need at the best possible interest rates. Obtaining a good interest rate can save you a lot of money when shopping for a car, home, small business or other major purchase. Having good credit also gives you greater options in choosing a loan, especially on the Internet where lenders compete for the business of credit consumers.
  2. A good credit history can help you get a job. Employers have learned that people who meet their financial obligations are more likely to be responsible and dependable employees. Simply put, good credit can make much of your personal and professional life easier.
  3. Whenever you obtain credit or a loan, the lender continually reports your repayment history, usually to all three of the nation's major credit bureaus. This repayment history forms the core of your credit report, and is what lenders analyze when deciding whether or not to extend you new credit. Credit bureaus only store your repayment history - they take no part in granting credit (that's up to the lenders).
  4. Pay your bills on time! Your success at establishing good credit depends on making smart decisions about the type and amount of credit you use, as well as managing your debt so it doesn't get out of hand. It is not only important to pay on time, but it is also wise to be sure you can afford to make the payments. Keeping a cap on spending helps prevent your debt from growing to an amount you find too difficult to manage, or cause you to pay more interest than is actually necessary.
  5. Don't spend more than a third of your income on your combined debt: mortgages, credit cards and consumer loans. Try to use credit cards for purchases that have long-term value only, such as furniture, medical care, or emergency repairs. Many people overextended themselves when they use credit cards for treats like dining out or entertainment. Poorly managed credit can take you deep into debt, and can lead to missed payments and a damaged credit rating.
  6. Your credit report does not contain any data about race, religious preference, personal lifestyle, political preference, medical history, friends, criminal record or any other information unrelated to credit. The bureaus do not collect this information!

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