Credit History

Credit history - importance of & how to establish

Importance of a good credit history

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. Based on your credit payment history, businesses can choose to grant or deny you credit provided you receive fair and equal treatment.

 

Your Credit Report

Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

 

The three major national credit bureaus are:

EQUIFAX
PO Box 740241
Atlanta, GA 30374-0241
(800) 685-1111

EXPERIAN (formerly TRW)
PO Box 2002
Allen, TX 75002
(888) EXPERIAN (397-3742)

TRANS UNION
PO Box 1000
Chester, PA 19022
(800) 916-8800

 

Establishing a credit history

Suppose you haven’t financed a car loan, a computer, or some other major purchase. How do you begin to establish credit? First, consider applying for a credit card issued by a local store and use it responsibly. Ask if they report to a credit bureau. If they do — and if you pay your bills on time — you’ll establish a good credit history.

Second, consider a secured credit card. It requires that you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional nonsecured cards.

Third, consider asking someone with an established credit history — perhaps a relative — to co-sign the account if you don’t qualify for credit on your own. The co-signer promises to pay your debts if you don’t. You’ll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own.

A positive credit history is an asset, not only when you apply for a credit card, but also when you apply for a job or insurance, or when you want to finance a car or a home.

 

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