Understanding the Importance of your Credit History and Score

Who needs a good credit score anyway?  

Credit history, credit reports, credit scores – you might be saying who cares about all this stuff? Maybe your parents help you with all your expenses, or you just think you can get through life without worrying about credit. Wouldn’t that be awesome, but the fact is as you get older, your credit history becomes a very important part of your life.

Your credit history, or how you use money, impacts just about every aspect of your life and your credit score is based on multiple factors including what type of credit you utilize and how you handle money.

     Do you pay your bills on time? 

     How many credit cards and loans do you have? 

     Are you a responsible money manager?

     Do you spend more money than you earn with no savings in place to help offset the debt that you’re incurring?

It’s important to remember that your credit history and score helps lenders determine whether or not you will be approved for a loan, and what the rate will be for the loan if you are approved. At some point in your life, you will probably need a loan for a house or a car because most people can’t afford to pay cash for these types of larger purchases. And, even if you don’t want to get a loan, your credit score and history impact more than just qualifying you to borrow money.  

Many companies use credit scores to judge the responsibility of the candidates they are considering for employment. If you can’t handle your own finances, could they trust you to handle business finances. Additionally, insurance companies will sometimes use your credit score to quote your insurance rates. And, you won’t be renting any type of property if you have a bad (or no) credit score.  

That’s right, if you don’t have a credit score then evaluating you for a job, insurance or even a loan is very difficult. In most cases if you get a loan without a credit score or history, the lender will charge you a high rate of interest and require you to put a higher down payment because of the risk they are taking by giving you a loan.

So, it’s really in your best interest to manage your credit history and to ensure that you have a good credit score, because the negative impact of a bad credit history and score could have a huge financial impact on your finances over time. While a good credit history and score could save you thousands over the years.

 So you’re probably wondering what is included in your credit report and how you can get a copy.

What’s in your Credit Report?

Your credit report is a summary of your credit history monitored by three major credit bureaus. TransUnion, Equifax, and Experian collect credit and other information about you and your finances including:

• Your name, address, and Social Security number
• All of the credit cards you have whether they have a balance or not
• All of your loans, the type of loans and how much you owe on those loans
• If you pay your bills on time or late
• If you filed for bankruptcy (a legal procedure that you utilize when you can’t pay your debt)

Businesses utilize these credit bureaus to run a credit check on you before they decide whether to lend you money, give you a credit card, or rent you an apartment. But don’t worry the Fair Credit Reporting Act (FCRA) requires that the credit bureaus must make sure that the information they collect about you is accurate. But you want to check your credit report regularly to be very sure the right information is there.

 How do you check your Credit Report?

You have the right to get a free copy of your credit report every year from the three major credit bureaus (TransUnion, Equifax, and Experian). Some financial advisors suggest staggering your requests over a 12-month period to help keep an eye on your reports and make sure they have accurate information. The best way to get your free credit report is to go to AnnualCreditReport.com or call Annual Credit Report at 1-877-322-8228.