Credit reports: Your credit report is a glimpse of how you have handled credit in the past. It’s important to know what your report says about you and work to correct any past mistakes. Even though you can’t erase any accurate past information, you can begin paying your bills on-time and demonstrate that you have learned to handle credit more responsibly.

What’s in your report? A credit report contains identifying information about you such as your Social Security number and past addresses, the creditors and amounts that you owe, how you have paid your bills (on-time, 30, 60, 90 days or more past due), charged off accounts, bankruptcies, judgments, settlements, liens, and inquiries (number of times you have applied for credit).

What if I don’t have a credit history? If lenders have no example of how you repay your loans, it can be an obstacle just like a bad credit history can be. In order to build a good credit history, you will need to obtain credit or a loan and repay it on-time over a period of time. If you pay cash for everything or pay things off right away, it may be good for you financially but it won’t do much to build your credit history. If you don’t need credit, you may be in good shape but most of us need it to obtain larger purchases such as cars or homes.

Credit scores: A credit score is a measure of how likely you are to repay your debts. The higher the score, the more likely you are to repay your loans, therefore a lower risk to a lender. The lower the score, the higher the risk. All three credit bureaus use credit scores to measure your creditworthiness. Scores range from around 500 to more than 800. Mortgage lenders typically look for a score of 650 or above for the best interest rates. To learn more about credit scores, please visit www.myfico.com 

	What’s in a score? Your credit score consists on 5 parts: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, and 10% types of credit in use.
	What’s NOT in a score? Credit scores do NOT consider race, religion, sex, marital status, age, salary, employment history, child support obligations, or any affiliation with a credit counseling agency.
	How do I improve it? In addition to your score, credit reports may offer explanations as to why your score isn’t higher. You can work to correct these issues in order to improve your score. Some include: past delinquencies, balances too close to credit limit, not enough credit history, etc. You can improve your credit score by paying your bills on-time, paying down your credit cards, applying for new credit only as needed, and checking your credit report for accuracy.

Free Credit Report: According to a recent law, consumers are entitled to one free credit report from each of the 3 credit bureaus each year. If you want your score, you will have to pay for it. The new law is going into effect in waves. Western and Midwest states are already eligible. Southern states go into effect June 1 and Eastern states and U.S. Territories become eligible September 1, 2005. Currently, the only way to get the free report is to visit www.annualcreditreport.com.  (We will keep you posted if this changes!)

	Review your report: It’s very important to review your credit report on a regular basis. Creditors are not always diligent about updating your report so it’s possible for your report to show that you owe more than you do. If the balance is out of date, have it updated. Also, there may be accounts that don’t even belong to you. I helped a client once whose credit report showed she owed $70,000.00 in student loans when she had never even gone to college!
	Dispute any inaccurate information: According to the Fair Credit Reporting Act (FCRA) you have a right to dispute any inaccurate information in your credit report. The credit bureau has 30 days to investigate and must either confirm, update or remove the information. It’s important to preserve your rights under the FCRA by disputing the information through the credit bureau, instead of just directly with the creditor.
	Update any old information: Aside from Chapter 7 bankruptcy and student loans, information may only be reported for 7 years from the date of last activity. If you notice accounts that have been inactive for more than 7 years, dispute this information to have it removed.
	Enter a statement: You may enter a statement on your credit report that explains any problems with your payment history. It may or may not make a difference to a lender but it will at least give you a chance to explain any extenuating circumstances that may have affected your payment history. Also, if you have completed any financial literacy training, you may also want to report this to lenders through the statement.
	Check for fraud: If you notice accounts that you never opened or don’t recognize, have them investigated. If you suspect that someone has been obtaining credit in your name, alert the credit bureaus to a possible fraud alert. They can increase the security level associated with obtaining credit. Also, be sure that you report any fraud to the local police or FBI.