Not Made Of Money

Your credit report is a valuable tool in your financial arsenal. Your credit report could help you negotiate a better rate on a home mortgage. In addition, a copy of your credit report could be your first clue if you’ve been the victim of identity theft. The first step in knowing how to use your credit report, though, is to know what is in it.

Some relatively benign information is found in everyone’s credit report. The subject’s name, social security number and address are always listed. Other information might include formerly used names (like a maiden name), present and past employers, and old addresses. This information has little to do with your credit history; it usually serves more as an identifier.

The meatier part of the credit report is a listing of all of your credit accounts. A perusal of your report will reveal all of the important details about these accounts. The account’s credit limit, highest balance, latest balance, and opening date are all found here. Most importantly, though, your payment histories to those accounts are displayed here.

The payment history reported in your credit report is important because this is the strongest indicator to potential creditors of your ability to pay your accounts in a timely manner. A payment history with no late payments is ideal; this type of history tells potential creditors that you take your finances seriously and pay them all consistently. A smattering of late payments tells creditors that you occasionally experience a little blip in your financial life, but extending credit to you is probably a safe bet. A payment history littered with late payments and charged-off balances, however, sends up a huge, red flag to potential creditors. This tells creditors that you aren’t able to handle the credit you already have. They’ll certainly think twice before offering you anymore.

Finally, your credit report may contain a personal statement from you. If you’ve experienced an uncharacteristically bad financial time (a divorce or lay-off, for instance), you can issue a statement explaining the situation. You can check with each of the three credit reporting agencies to find out how to add a statement to your report. Bear in mind, however, that your personal statement will do little to mitigate any damage to your credit score that comes from late or missing payments.

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