What Goes Into Your Credit Report?

Without credit, most of us couldn't make some of our everyday purchases, let alone such important ones like a new car or house. Consequently, most of us need to work to maintain a good credit rating. But do you know exactly how to keep your credit rating clean?

When considering extending credit to loan applicants, lenders refer to the credit ratings determined by three major credit bureaus - Equifax, Experian and TransUnion. Here are the factors those companies use to compile your credit rating.

• Payment History - How promptly you pay your bills is a primary factor in determining your credit rating. If you are consistently 30 or 60 days late in your payments, this information will be reflected in your credit score. Needless to say, prompt payment is always best.
• Open Credit Lines - How much credit you currently have available to you is another important factor. If you have several credit cards, potential lenders are likely to consider you a greater credit risk, since potentially you could go on a spending spree and max out all of your cards. Your best bet is to cancel all credit cards you don't truly need for everyday purchases and emergencies.
• Credit Inquiries - Each time you apply for a credit card or loan, you give a potential lender permission to make an inquiry into your credit history. Each inquiry is recorded by the credit bureaus, and frequent credit inquiries negatively affect your credit score. Thus you shouldn't apply for credit simply because you have been pre-approved or have received an invitation to apply. Apply only for those loans or credit cards that you need and will use.

Protect Yourself Against Identity Theft

An identity thief is someone who steals one or more key pieces of your personal information, uses that information to establish credit in your name, then spends as much money in as short a time as possible. While the law limits your liability for such fraudulent expenditures, restoring your credit rating after your identity has been stolen is typically a long and difficult process. For this reason, and because incidents of identity theft have skyrocketed in recent years, it pays to take these basic, precautionary measures:

• Carry less information with you. Take out of your wallet credit cards you don't use, your Social Security card, passport, account numbers - anything you don't really need to carry and which an identity thief could use against you.
• Protect your Social Security number. Very often, your Social Security number is an identity thief's key to the rest of your personal information. Don't give it to anyone unless it's absolutely necessary.
• Be careful with your access codes. When choosing a Personal Identification Number or access code, never use your birth date, Social Security number or any other obvious code - they're the first numbers an identity thief will try.
• Watch your mail. Some identity thieves steal financial statements and credit card offers out of their victims' mailboxes, or out of the trash after they've been thrown away. Protect yourself by removing mail from your mailbox promptly, and by tearing up statements and applications before you discard them.
• Monitor your credit report. Check your credit report for any irregular activity at least once a year. For a small fee, you can order a copy of your credit report from any of the three major credit bureaus: Equifax (1-800-685-1111), Experian (1-800-682-7654) and TransUnion (1-800-916-8800).

Bankruptcy - A Quick Fix That Will Cost You

It sounds so easy: Call a bankruptcy lawyer and get rid of all of your debt. What they don't tell you is how it will affect your credit history in the future and end up costing you more money down the road.

Here are four important reasons not to file for bankruptcy:

1. A bankruptcy discharge stays on your credit report for 10 years, jeopardizing every loan application you make for an entire decade.
2. You may lose your membership in the credit union. That costs you money in the long run because there are few financial institutions that offer quality service and are as competitive on fees and savings and loan rates as we are.
3. If you are somehow approved for a loan following a bankruptcy, you will be limited in your choice of lenders and will pay a much higher interest rate than other borrowers.
4. There may be some debts that your bankruptcy does not discharge, such as tax liability, child support, and some student loans.

If you are considering filing for bankruptcy, please call the credit union to discuss your options.