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Consider your credit history as important as your job resume. A good resume can land the job you want, while a good credit history can help you land an auto or home loan at the best rates.  In fact, your credit report can be used by potential employers to evaluate you as a potential employee. 

Lenders use your Credit Score (also called FICO Score, after the Fair Isaac Corporation which created the software to calculate the score) to determine whether they will extend credit to you.  If lenders are taking such an interest in your credit history, shouldn’t you?

Your credit score is calculated by the 3 credit bureaus: Equifax, Experian, and TransUnion.  Since the information these companies have may be slightly different, your credit score may differ from company to company.  For example, Equifax rates your score on a scale of 300-850, with 850 being the best.  With very high credit scores, you will get the best lender rates because they consider you a lower default risk.  What is a good credit score? If you have scores over 700, pat yourself on the back for your good handling of credit and assume that most lenders would be happy to give you money. Credit Scores below 600 indicate high risk to lenders and could lead to higher interest rates or a denial of credit.

So how do you find your credit score?  The Fair and Accurate Credit Transactions Act was signed into Federal law in December 2003 (the FACT Act) and allows you to get one free credit scores report from each of the credit bureaus every year. You can order credit reports that include your credit score from the reporting agency directly. Or, you can sign up for a fee with companies like privacyguard.com that send you a composite report from all three companies, and will monitor your credit for any changes.

Is your score not quite as high as you like?  Then consider taking some steps to repair your credit score:

HOW TO IMPROVE YOUR CREDIT SCORE

Never miss a payment. If you are prone to the “messy desk” syndrome, where bills can magically disappear, consider automatic checking account withdrawals for mortgage and utility bills. Just make sure that there are enough funds in your checking account to cover all your automatic drafts. Approach your bill paying like a business and take it seriously.

Use credit… Believe it or not, having available credit is actually a positive factor, along with paying your credit card bills on time. Get credit cards and keep them for a long period of time. You don’t have to hold a balance – paying off credit card balances every month still gives you positive payment history. To get the very best credit score, accumulate 30 years of spotless credit history. If you were still getting an allowance from your parents 30 years ago, consider this something to work for.

…but not too much. Unfortunately, high credit card balances can be a negative factor, as lenders fear that a changing income situation may make paying off balances difficult. If you want to apply for a mortgage within the next year, try to reduce any high debt load. The more you owe compared to your credit limit, the lower your score will be.

Clean up credit errors. If you have any errors on your credit reports, you need to dispute the information in order to clear your record. This is the toughest task, because it requires some letter writing (some can be done online at the credit bureau websites) and perhaps phone calls to both the credit bureau and the organization that reported the information. The difficulty in cleaning up errors is why so many people dread having their “identities” stolen.

Resolve to do better. Ok, so your credit report has a few delinquent payments that you wished never happened. What do you do? Besides resolving to never miss any more payments, you must wait – seven years to be exact – when the missed payments will no longer be on your report. The Federal Trade Commission warns against enlisting companies who promise to improve your credit score. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is that they can't deliver. After you pay them hefty up-front fees, these companies do nothing to improve your credit report and some simply vanish with your money.

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