A solid credit history can be one of your most useful and powerful financial assets. A record of wise credit use and timely payments can increase the likelihood that you’ll qualify for credit, but it may also enable you to get a lower interest rate when you need to borrow money.
There are three main credit agencies that gather financial information on individuals and then make that information available to lenders to help them determine whether to make a loan to someone. The information they compile includes a great deal of basic data such as age, Social Security number, current and previous addresses, employers and marital status.
The credit agencies, sometimes called credit bureaus, also get information on your borrowing history from credit cards issuers, mortgage lenders and other sources. All of this information is compiled into a credit report. Your individual credit report generally includes all of the credit relationships you have, the date established, the maximum allowed credit, your current balances and your payment history.
Indications of a solid credit history include some — but probably not extensive — borrowing activity and regular, prompt payment of bills. Items that could hurt your credit report include bankruptcy, late payments, too many credit cards with balances close to the limit and even too many applications for credit.
Lenders will use a credit report and any collateral (property you own) in evaluating your capacity to repay and making decisions to lend you money. Many lenders also take these same factors into account when deciding what interest rate to charge or type of product to offer.
It’s important to make sure your credit report is accurate and up to date. You can receive a free credit report once a year from www.annualcreditreport.com. Or call the credit agencies to request your report (there may be a small charge, unless you have recently been denied credit):
- TransUnion: 800-888-4213
- Experian: 888-397-3742
- Equifax: 800-997-2493
If you see an error on the report, contact the credit agency to note the discrepancy and ask that it be corrected. Negative information generally remains on your credit report for seven years and bankruptcies may remain for 10 years. However, most lenders pay particular attention to your most recent two or three years of activity.
Being aware of your credit report, making sure it is accurate, working to improve your credit characteristics and understanding the importance of your report can all help you ensure that credit will be there when you need it.
If you would like more information about financing for your borrowing needs, contact a First Internet Bank Relationship Banker at 1-888-873-3424.