MoneyTips Gift To College Grads: Your Credit Report

Congratulations! You’ve made it through college and are looking forward to using your new skills in the real world. Here’s our gift to help you start your journey – a copy of your credit report.

If you aren’t familiar with your credit report and how it works, now’s the time to check it out.

Your credit report is a collection of all of your borrowing activities. Whenever you borrow money and make payments (or miss them), your creditors report that information to the three major credit reporting agencies (TransUnion, Experian, and Equifax). If you have part of America’s nearly $1.5 trillion in student loans, your repayment record will show up here. Your future credit cards and loans will show up here, too.

The credit reporting agencies use your credit report information to calculate your credit score – a single number between 300 and 850 that tells creditors how risky it is to loan you money. Higher scores show creditors you’re likely to pay back your loans and credit card balances. Lower scores show less responsible borrowing behavior. You may be charged higher interest rates for loans and credit cards or be denied credit altogether.

Credit reports contain four different kinds of information, starting with your personal information – including your name, address, birthdate, and Social Security number. Review this first to make sure the information is accurate.

Another section covers all credit accounts you have ever opened, both current and closed. Information includes the type of account (installment loans or revolving accounts like credit cards), the date the account was opened, the loan amount or credit limit, and the history of all payments you’ve made (or missed). Check this section for any recording errors or charges you’ve never made and accounts you’ve never opened – signs of identity theft.

Negative aspects of your credit report, like bankruptcies or missed payments, show up in a separate section. Even though rent payments and monthly bill payments like cable TV and data provider bills aren’t reported to the credit reporting agencies, accounts that go into collections will be.

The last section shows inquiries that creditors have made to see your report. Hard credit inquiries correspond to credit applications you’ve made. Soft inquiries occur when you check your own credit report, or a lender or credit card issuer checks your credit to send you a solicitation.

Why should you care about your credit report and credit score? A poor credit profile could affect your ability to get an apartment, or even a job, by implying risk. A good credit record allows you to get credit at reasonable interest rates when you need it – and at some point, you will. (Even if you avoid credit cards, you probably can’t pay for a home with cash.)

To develop and keep a high credit score, follow a few simple rules. Make all payments on time, keep credit card balances well below limits, keep overall debt levels low, and check your credit report regularly for any signs of identity theft that could be harming your score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

Your student loan may be a burden, but it’s also an opportunity. Make your payments on time as expected, and you can quickly build your credit score.

A new college diploma doesn’t guarantee success, but it does open up new possibilities for good jobs. Access to your credit report doesn’t guarantee good credit, but it does allow you to monitor your credit, track improvement, and limit any damage from identity theft. Use both the diploma and the credit report wisely.

Please click on the gift certificate below to get your free credit score and credit report.

Photo ©iStockphoto.com/fstop123

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