A Guide To Consumer Credit Reports

By Chris Channing in Finance on April 12th, 2008

-->

by Chris Channing

Ever since the early 1900’s, credit has been an important part of consumer culture. To afford necessary items such as a house or car, consumers must buy on credit. This may pose a problem to consumers who don’t have a perfect credit score- so how does one obtain a pristine credit history?

The Anatomy of a Credit Score

In one’s credit report, there is a special number that is used to describe the person’s ability to repay debt. This number depends on multiple factors- and the higher the number, the better the credit. In many cases if one’s credit score is poor enough, they will not be able to buy commodities such as cars or houses.

The actual numeric score depends on several things- one being the history of one’s payments. If you have ever been behind in paying a bill, you will thus be more likely to have a lowered credit score. Responsible behavior, such as keeping a job or home for a long period of time, also helps improve one’s credit score.

More importantly, credit companies and lenders tend to give those with a history of any kind of relationship with credit a higher score. If you are young and don’t have much to show for your credit history, you will be much less likely to obtain a loan as a result. This is the hardest part to obtaining good credit for younger adults- as a better credit score comes only though due time.

Don’t trust credit companies to keep your information private. In fact, credit companies sell your information to lenders and other companies who may need to know your credit history. This means that if you do indeed make mistakes on your credit, virtually anyone with the right connections will know about it.

Credit-Killing Acts To Avoid

Some acts are unavoidable- you may not be able to protect against an identity theft, for example. But for other things, there are ways to avoid bad credit ratings through responsibility and common sense.

In the case of identity theft, reporting the problem to a bank as soon as you expect wrong doing can often avoid the negative marks on your credit history altogether. But to avoid the scenario completely, you should engage in security tactics such as shredding information obtained in the mail- or opting for a post office box instead of a mailbox.

Another big cause of negative credit scores lies within signing a loan for someone you know. Often, the person may skip a payment and the loan will default. In that case you will be expected to pay the remaining balance. If you aren’t able, you should expect a nasty mark on your credit score as a result.

In the end, a good credit score is the product of responsible behavior. Don’t buy things you can’t pay for, and only trust those who can be trusted. Following these simple two rules will ensure a good credit rating over time.

About the Author:

Looking for Consolidation Loans? Obtain your Free Credit Report now!