Submitted by the HealthNet Federal Credit Union
In the money world, a credit report can leave a lifelong imprint about your spending habits. In other words, it’s a report that captures your history of managing money. More importantly, it tells the world your credit status and if you’re trustworthy with credit.
What does a credit report track?
- How often you make your payments on time
- How much credit you have, (how much you have used or owe verses what you have available)
- Whether a debt or bill collector is collecting on money you owe.
- Public records such as liens (a right to retain possession of another’s property pending discharge of a debt), judgments, and bankruptcies that provide insight into your financial status and obligations.
How can your credit report help you? With a higher score and a history of financial responsibility (such as on-time payments), your credit report can help you secure loans for auto, mortgage and signature loans at a lower interest rate. Other companies will reference your credit report to help with decisions such as providing or pricing insurance; renting property; providing cable, Internet, utility or telecommunication services; and – if you agree for a business to review your consumer report – making employment decisions.
How can your credit report hurt you? Much in the same way that it can help you, it can also hurt you. With a poor credit report, businesses can decide not to provide a loan at all or with a much higher interest rate. Insurance premiums could be higher, or you may not be able to rent a property or have utilities for said property.
What can you do to improve your credit report? Consistency over time can help improve a credit report. To improve your score, follow these few key tips over time.
- Make consistent payments on time.
- Do not open every retail credit card you can find. For one or two of your credit cards, make a regular purchase and regular on-time payment.
- Try to keep your debt-to-credit ratio at 30 percent or lower. Pay down any balances you have and keep them down. If you have numerous credit cards, it’s best not to keep even a small balance on those cards. Multiple balances, even small ones, can hurt your overall credit score. Negative items are bad for your report. If you have cleared up and closed an account that had a negative impact of your report, call and ask it to be removed. Most closed items will fall off of your report automatically within seven years.
- When shopping for the best loan interest rate for auto and mortgage, it’s best to make all inquiries within a two to three week period. When the time frame is spread out, each time you have someone pull your credit, it can hurt you; but when you have multiple applications for the same type of loan within a small time frame, it is not held against you and cannot hurt your overall score.
How can I monitor my credit report? You are allowed a free credit report from each of the three major credit bureaus each year (Experian, Equifax, and TransUnion). The best way to stay on top of it is to order one every four months. This way you can monitor your information throughout the year. This can be especially helpful when you know that you will be making a big purchase such as an auto or mortgage within the next few months.
A HealthNet Federal Credit Union loan officer can help answer questions about your credit report. To request a copy of your free annual credit report, visit www.annualcreditreport.com.
By understanding your credit report, you’ll build a credit history that works in your favor for a long time.