Money Basics

Credit reports and ratings

A credit report is an overview of your financial life. It lists—in great detail—information about how much you owe, any loans you have defaulted on, and late payments. It may also reveal whether you've been arrested or sued or have filed for bankruptcy. It is the content of your credit report that makes up your credit rating.

Also known as a credit score, a credit rating is a three-digit number between 300 and 800 that represents your credit risk to lenders. Your credit rating affects your ability to borrow money, your ability to obtain health insurance and in some cases your ability to get a job. A bad credit rating can also increase the cost of using credit.

To help you obtain a solid credit rating:

• Make all payments on time. Late payments can damage your credit rating.
• Open and responsibly maintain a checking or savings account. This shows that you have money to pay bills and that you're setting money aside for the future.
• Get a credit card, and use it only when you can comfortably repay it. To establish good credit, you need to use credit regularly. However, don't overuse it. Lenders may become concerned that you won't be able to pay your bills.
• Don't apply for too many credit cards. Applying for several cards can hurt your credit rating.

To determine whether you have a good or poor credit rating, obtain a credit report. Although some companies offer to sell you a copy of your credit report for as much as $50, basic credit reports are available for as low as $9.

You can order a credit report from one of the three major credit reporting agencies:

• Equifax, www.equifax.com, (800) 685-1111
• Experian, www.experian.com, (888) 397-3742
• TransUnion, www.transunion.com, (800) 888-4213

Under the Fair Credit Reporting Act, anyone denied credit must be provided a free copy of their credit report if they request one. The credit bureau that provided the initial report to the company that denied credit must provide the report.