Knowing and Understanding your credit

There are several steps you can take to get closer to your dream of owning your own home. One of the most important steps is to establish good credit. This is especially important if you have had problems in the past. Establishing good credit may mean getting in the habit of paying your bills on time or taking care of your debts. It may even mean creating a nontraditional credit history if you have never borrowed before. Another step would be to keep it once you have it established.

Sometimes people think they have good credit but when they apply for a loan they are surprised to learn that there are some problems. The best way to find out where you stand is to get a copy of your credit report. The report is a record of how you have paid your card debt and other loans. The report shows how much debt you have, if you have made payments on time or if you have not paid back some loans at all. The reports do not show information about your race, religion, medical history, personal lifestyle, political preferances, criminal record or anything else unrelated to credit. They are compiled by national credit reporting agencies. The typical credit report includes four types of information.

Identifying information: your name, current and previous addresses, telephone number, Social Security number, date of birth, and current and previous employers. This information comes from your credit applications.

Credit information: specific details about your credit cards, student loans and other loans. This information includes the date opened, credit limit or loan amount, balance and monthly payment. The report also shows your payment history during the past several years. Late payments, skipped payments, accounts turned over to a collection agency, and repossessions appear here.

Public record information: bankruptcy records, foreclosures, tax liens for unpaid taxes, monetary court judgments and in some states overdue child support.

Inquiries: The names of those who obtained a copy of your credit report and how often you have applied for credit in the past two years.

The best way to know what your credit report shows is to order one and review it carefully. It's a good idea to order your credit report once a year to make sure there's no error on it. You can order your report from any of the major credit reporting agencies listed below. You may have to pay a small fee (about $8).

Equifax 1-800-685-1111
Experian 1-888-397-374
Trans Union Corporation 1-800-916-8800