Improving Your Credit Rating

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Even if you have not fallen on hard times, you need to know about your credit rating and how to make sure it accurately reflects your credit history. Negative information in your credit report can adversely affect your ability to get credit or get the best loan interest rates. Information about your credit history is collected by credit bureaus, who then sell this information to lenders and others who need it in connection with loans, getting a job, or other financial applications you may make. You must authorize the credit bureaus to give out this information by signing a waiver on an application you make. There are three primary credit bureaus in the United States who collect and disseminate this information: Equifax, Experian, and TransUnion. You should obtain a copy of your credit report from each of these bureaus at least once a year to verify that the information they have is correct.

You build your credit report every time you apply for and use credit. Creditors send information about your credit history with them to one or more of the credit bureaus. Most of the information is accurate and timely, but sometimes it is not. When you miss loan payments, pay late, default on a loan, or have a debt dropped (called a charge-off), that information goes on your credit report. Even legal information, if you have lawsuits or judgments against you, may find its way on to your credit report. When you authorize a potential employer, creditor, or other person to get this information, they will make a judgment about and your creditworthiness (trustworthiness?). So, it is important that the information in your report at least be accurate and, better yet, positive information. Generally, information remains on your credit report for seven years. If you file for bankruptcy, that information may remain on your report for up to 10 years.

The best way to improve your credit report is to have a good credit history.

While no one can legally remove accurate and timely negative information from your credit report, you do have the right to request a re-investigation of the facts and to dispute inaccurate information. So, if you find that you have questionable information on your credit report, you should contact the reporting agency for a dispute form, or send your own letter with a copy of your report clearly showing which items you are disputing and why you dispute them. The credit bureau is required to investigate and send you their findings along with a corrected credit report if changes are made. If your dispute is not resolved, then you have a right to have the credit bureau send a copy of your side of the issue along with their credit report to those requesting your report.

The best way to improve your credit report is to have a good credit history. If you are just starting out or if you need to do "credit repair," obtain and use a secured credit card, being sure to pay the full balance each month—you do not need the extra finance charges. Secured credit cards are issued by some banks, credit unions, and credit card companies that require you keep a minimum balance in a savings account to secure the card. For example, if you keep $500 on deposit, you can get a credit card with a $500 credit limit. Be sure to pay all your bills on time—make and stick to a budget.

You can get a copy of your credit report from each of the three credit bureaus by contacting them at:

Equifax (800-685-1111, www.equifax.com/)
Experian (888-397-3742, www.experian.com/)
TransUnion (800-916-8800, www.transunion.com/)

The law now allows consumers to get a free credit report once every twelve months from each of the three national consumer credit reporting companies (Experian, Equifax, and TransUnion). These three major credit reporting agencies have set up a Website—annualcreditreport.com—to provide free access to annual credit reports.

You may be entitled to a free credit report if you have been denied credit because of a credit report, within 60 days of denial. Otherwise, the credit bureaus may charge you up to $9.50 for a copy of your report. You should get a copy of all three reports, as they may contain different information from different creditors. Dispute any and all inaccuracies. You do not need to hire a credit repair agency. Such companies cannot do for a fee anything you cannot do on your own for free. No one can legally make your credit history go away or give you a "new credit identity." Checking your credit report regularly is especially wise, considering all the incidences of identity theft in this day and age.

For more information on credit from the Federal Trade Commission, visit its Website.