Unlocking the Mysteries of Your Credit Report

Have you heard of your permanent record? Most teens are concerned about the grades they get and their extracurricular activities because, when it comes to getting into college, your academic record is important. But did you realize that in addition to report cards and transcripts there is another permanent record that follows you long after you are finished with school. That record it your credit report and it’s a good idea to understand how it works as early as possible. It’s never too soon to start building a good credit history.

The first step you can take to let lenders know you’re creditworthy and to make sure you build a good foundation for your credit report is to have a savings account at your credit union and make deposits on a regular basis. Then, when you’re old enough for a checking account at your credit union, you should open one and then use it responsibly.

When it’s time to buy a car or even a computer, check with your credit union to see what options they have for financing. Your credit union will normally have the best overall deal on rates and terms. (If you are under 18, you may need a parent or guardian to apply with you for a loan.)

Remember to always pay your bills on time or early. Even a missed rent payment or a missed cell phone payment can have a negative impact on your credit report.

Finally, when you do get a credit card, make sure to always pay on time and try to pay off your balance each month so that you don’t carry a debt and pay finance charges.

PART 2: So now you know the steps to take to get a good grade in credit, but what does a credit report look like? There are four kinds of information on a credit report:

Identifying Information: Including your full name, your birth date, current and previous addresses, your Social Security number, current and past employers, and, if you’re married, your spouse’s name.

Credit Information: This area of the report will show all of the credit accounts you have with financial institutions, retailers, credit card issuers and other lenders. For each account, the report will list the kind of loan, the date the account was opened, the credit limit or loan amount and the current balance, or amount owed. It will also list the names of co-signers on any co-signed loans you might have, and provide a detailed record of how promptly you’ve made payments on the account. Negative information remains on your credit report for up to seven years – even just a simple missed payment.

Public Record Information: This includes any state and county court records on bankruptcy or other cases involving money. Bankruptcy information can stay on your credit report for up to 10 years.

Inquiries: Finally, your credit report will show a list of names of people and companies who have received a copy of your credit report. The only people who are allowed to get a copy of your credit report are organizations to which you’ve applied for credit, employers, insurance companies, government agencies and anyone with legitimate business such as a landlord who wants to examine your credit history before leasing you an apartment.

You may be thinking, “Who cares if my credit report is good or bad?” You should. If you have a bad credit report you can be stopped from doing all sorts of things. You may not be able to sign up for a cell phone account, you may not be able to get a credit card or a loan for an important purchase, and you might not be allowed to rent the apartment you want to live in. Your credit report basically shows anyone who sees it whether or not you pay back the money you borrow and whether or not you pay your bills on time; if this report looks bad, no one will want to lend you money. If you are able to get loans with a bad credit report, the interest rates are usually higher, which means you’ll pay a lot more for the item in the long run.

If you have a good credit report, things will be much easier. You will be able to get better interest rates on loans and credit cards because lenders will be competing over you. You will have an easier time qualifying for a mortgage for your first house and a loan for your first car. You will look good on paper to landlords and cell phone companies and everyone else with an interest in your credit.

It’s easy to make sure you get a good grade in credit, but it’s also easy to mess up your credit with late payments or by applying for too many credit cards. Follow our tips and you’ll be on your way to having a blemish-free credit report.