A credit report is your personal credit history. It includes your personal identification (address, social security number), trade lines (credit cards and loans you have now or had in the past), public records (like bankruptcies or lawsuits) and inquiries (how many agencies are looking at your credit report).

Get your free credit report once a year at: www.annualcreditreport.com.  You will be directed to each of the 3 credit bureau websites to download your report – you will be asked a personal question about your credit that only you should know the answer to access your report. Remember to save it on your computer or print it out, you cannot re-access it for free.

Credit bureaus provide reports to creditors, insurance companies, employers, landlords and anyone else who has a legitimate need for the information so they can make well-informed lending and business decisions. The three major credit bureaus in the United States are Experian, TransUnion, and Equifax.

A credit score is a calculation of the likely risk of giving you new credit (like a loan or credit card) based on the information available in your credit report. Scores generally range from 300 to 850, with higher numbers indicating a lower risk. The higher your credit score, the better (less expensive) credit you will qualify for. Your score changes over time based on your credit activity.

Steps for Improving your Credit Score
FICO Score Component: Payment history (Score Weight: 35%)

• Pay all your bills on time
• Dispute any incorrect information
• Negotiate settlements with collection agencies

FICO Score Component: Amounts owed (Score Weight: 30%)

• Keep balances down below 40% of credit limit
• 0% balance is best for credit score
• Request an increase in credit limit

FICO Score Component: Length of credit history (Score Weight: 15%)

• Keep oldest accounts open
• Do not open any new accounts

FICO Score Component: Number of inquiries (Score Weight: 10%)

• Do not open any new accounts
• Do not apply for new credit (cards or loans)
• Have some accounts open at least 48 months

FICO Score Component: Type of credit in use (Score Weight: 10%)

• Have at least 3 open lines of credit
• Have mix of loans and credit cards

Did you know?

70% of American’s credit reports contain incorrect information – and 25% of reports have errors that are serious enough to be denied credit.

Solution: Check your credit report at least once a year and dispute incorrect information online, by phone or by mail. (click on the link at the end of the article to download a sample letter).

By law, the credit bureau has 30 days to investigate the disputed information. The credit bureau must then give you a written report of the investigation and a copy of your report if the dispute results in any change.

In 2006, the Internal Revenue Service revoked the tax exempt status of 40% of the nation's credit counseling services for fraudulent practices.
Be sure to find a reputable credit counseling agency.  Check out www.cccs.org, one of the oldest and most respected consumer credit counseling agencies.  Also check out recommendations from the Federal Reserve and for a more local touch, contact your local IDA program. 

For free credit counseling, call 800.777.7526

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EQUITY would like to thank SFEARN and the Credit Counseling Center of San Francisco for this informative factsheet and sample letter!