PERSONAL FINANCE FAQS

You must show that you are creditworthy—that you can handle credit responsibly.  When you apply for credit, creditors consider:

• Ability to Repay—Whether you’re able to pay your credit invoices on your current income.  Creditors look at past income and obligations, other credit commitments, and whether another monthly bill will strain your budget.
• Assets—The value of your life insurance, car, home, and savings account, as well as other accounts and possessions.
• Responsibility—Have you paid your credit as promised in the past?  Have you paid on time and paid the full amount?  If you've never used credit, the creditor will be the one to decide whether you'll be a good credit risk.  Creditors also consider the frequency with which you change jobs or addresses.
• Accuracy—Double check to be sure that all the information you provide on the credit application is accurate.  The information you provide may be verified with local credit bureaus, your employer, and your landlord.
  

Pay your bills on time to maintain a good credit record.  If for any reason you can't pay on time, contact your creditors immediately and discuss your situation.  When changes in your life make repaying a debt difficult, creditors may work out an alternate repayment schedule, possibly without harming your credit record.  Ignoring your creditor's attempt to contact you will harm your credit standing.

If you are withholding payment because of unsatisfactory service or products purchased on credit, be sure to send a letter to your creditor explaining the situation.  Keep copies and records of your telephone calls, and include the date, time, and the name of the person you talked with.

Once negative information is in your credit bureau file, it remains on your record for seven years.  However, the negative consequences will be less damaging as time passes.  The important step is to get your account up to date and to continue to pay on time.

A credit bureau is an agency that collects information about your credit behavior.  This information is voluntarily reported by credit granting firms, such as the companies that grant you a credit card or lend you money.  Credit bureaus keep records of how you've repaid your debts.

Credit bureaus are computerized.  When you move, your credit history moves with you. Keep in mind that you have a legal right to see what's in your file.  The first time you apply for credit, a credit file will be automatically established for you.  Review your file every year or two to make sure it's accurate.

The three national credit bureaus are TRW, TRU, and Equifax.  To see the most recent credit report for yourself, just contact one of the three.  Sometimes there is a small fee, but you can get the report for free if you’ve been denied credit.

Sometimes people are denied credit because they have little credit history or have a short work history.  If you’re denied credit at one location, you can try to gain credit at another, or you can wait six months and try again.  It’s important not to apply for credit at every available store.  This could make you appear as if you’re seeking more credit than you can afford.

You could be denied credit because of:

• Lack of credit references
• Insufficient income
• Irregular or temporary employment
• Too short a period of residency or employment

A bad credit record is not easy to overcome.  By law, you have the right to know why you were denied credit.
When you apply for a loan without a credit record, a bank or other lending institution may require you to have a co-signer.  A co-signer is a relative or friend who also signs the contract and is responsible for paying if you can’t make the payments.

If you've had trouble getting credit, haven't ever applied for credit, or want credit in the future, here are some steps to get started:

• Open, use, and maintain in good standing a checking account at a financial institution that offers credit cards.
• Start a savings account and make regular deposits.  If possible, use the account as collateral to get a small loan.  Repay the loan promptly.  Keep your account in good standing—do not overdraw your account.

Establishing a solid credit history will not only affect your ability to borrow money or buy items on credit, but it may also affect:

• Employment—Some employers require a credit bureau report.
• Living Accommodations—Landlords often request credit bureau information for applicants.
• Interest On Loans—Consumers with better credit records generally receive more attractive rates on loans compared to those with faulty credit records.
• Convenience—Car rentals, hotel reservations, and many other transactions are easier to complete if you have a credit card.  Some transactions even require a credit card.