Credit Reports: Building a Better Credit Report

If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file is known as your credit report. It is chock full of information on where you live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. Consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses with a legitimate need for it. They use the information to evaluate your applications for credit, insurance, employment, or a lease.

Having a good credit report means it will be easier for you to get loans and lower interest rates. Lower interest rates usually translate into smaller monthly payments.

Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase accurate negative information in your credit report in exchange for a fee. The scam artists who run these ads not only don't deliver — they can't deliver. Only time, a deliberate effort, and a plan to repay your bills will improve your credit as it's detailed in your credit report.

The Federal Trade Commission (FTC), the nation's consumer protection agency, has written a booklet to help explain how to build a better credit report. It has six sections:

Section 1: Explains your rights under the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act.

Section 2: Tells how you can legally improve your credit report.

Section 3: Offers tips on dealing with debt.

Section 4: Cautions about credit-related scams and how to avoid them.

Section 5: Offers information about identity theft.

Section 6: Lists resources for additional information.

Next: The Fair Credit Reporting Act -->