If you have ever taken out a loan, used a credit card or participated in a “buy now, pay later” offer, you will have a credit history. Your credit report contains personal information, credit information, banking information, public records (bankruptcies or credit related judgments against you), collection information, consumer statements and credit report inquiries.
Before 1970 there were about 150 regional credit bureaus that divided up the country, today there are really just 3 major bureaus:
Credit bureaus make money by selling your information to potential lenders and have been known to make mistakes as is inevitable when dealing with millions of consumers. It is important to know what your credit report says about you and to make sure that your credit report is actually accurate and reflects your history. Mistaken identity has been known to occur in instances where individuals have similar names or birthdays.
You can receive your credit report in the mail for free, or online for a small fee. It is a good idea to review your reports annually even if you’re not looking for financing, just to ensure everything is in check. If you do find discrepancies, make changes promptly but be warned it can sometimes take a month for the changes to be made and to show up on your reports.
The top factors that make your score lower:
- There are too many consumer finance company accounts on your credit report. Having too much available credit can hurt your score. If you have several consumer accounts try to consolidate those balances and close the accounts.
- Your account balances are too high. As a rule of thumb keep your credit card balances below 35% of the available limit. High balances ongoing will negatively affect your credit score.
- There is not enough recent revolving account information on your credit report. Using your credit cards regularly is an important part of building healthy credit.
- There have been multiple lending institutions pulling credit reports on you. This is part of the advantage of using a Mortgage Broker; we pull one credit report and then go to several lenders vs. having several lenders each pulling your credit bureau.
Tips to improve your credit rating:
- Always pay your bills on time. (The payment of utility bills such as phone, cable and electricity are not recoded in your credit report, however some cell phone companies may report late payments.)
- Pay Debts as quickly as possible.
- Don’t go over the credit limit on your credit cards.
- Don’t make too many credit applications (use a Mortgage broker!). Your score doesn’t change if you personally make credit inquiries.
- Contact creditors if you’re having trouble making payments and work out solutions.
- Read the statements you receive from your credit card company carefully. Keep yourself up-to-date with any changes or fee increases.
Get a copy of your credit report from all three credit-reporting agencies at least once a year and make sure they’re in order.