What is a credit report? How can it help or hurt you? What can you do to make it better? These are all questions we’ve asked at some point or another. Here are some answers.
[toggle title=”What is a credit report?” state=”open”]A credit report contains information about your credit history as well as the status of your credit accounts. Information included is: 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; rental property repayment information if you are a property renter; and 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.[/toggle] [toggle title=”How can your credit report help you?” state=”open”]
With a higher score and a history of financial responsibility (such as on-time payments), your credit report can help you secure auto, mortgage and signature loans at a lower interest rate. Creditors look at your credit report to determine if they can loan you money, what interest rates they will offer you, or to determine whether you continue to meet the terms of an open account. 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.[/toggle] [toggle title=”How can your credit report hurt you?” state=”open”]
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.[/toggle] [toggle title=”What can you do to improve your credit report?” state=”open”] First, be consistent. Your report is a collection of your credit history going back several years. You cannot change things overnight. With time and consistent, improved behavior, you can have a positive impact on your credit report. What is improved behavior? 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. Keep the good items, such as items with a positive payment history (even if the account is closed), on your report. Trying to remove good items just because the account is closed is like making straight As on your report card and then trying to expunge the record 20 years later. Be proud and show it off! When shopping for the best auto or mortgageloan interest rate, 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.[/toggle]
So how can you monitor all this to ensure you are using the best credit practices? 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. As an added bonus, bring a printed copy of your credit report to any HealthNet location, and one of our loan officers will help you go through it, understand it, and point out areas that could help you improve your overall score. This can be especially helpful when you know you will be making a big purchase such as a car or a house within the next few months. Both vehicles and homes should be well thought out purchases, not something done on impulse. Take the time to go through the steps and do your research. In the end, your future credit reports will have a more positive impact.
For questions about credit reports, please call a HealthNet Federal Credit Union loan officer at 901-226-1111. To request a copy of your free annual credit report, visit www.annualcreditreport.com.
Not a member of HealthNet Federal Credit Union? Stop by any of our four convenient locations, or call 901-226-1111 and join today!