Jon Lowrey, DCCU President
DCCU

Many people, especially our children, often do not realize that credit reports will one day affect whether they can get what they need or want, or how much they may pay for their desires. Maybe even more important, a bad credit report can make a difference in a competitive job situation, or even prevent obtaining a job that requires a high security clearance such as in the military or government. Credit reports are a fact of life, and to prepare for the future consumers must understand this, and work to keep their reports good, or work to improve them.

Today there are three main credit reporting agencies (credit bureaus); Transunion, Experian and Equifax.

Most credit grantors report to one or all of these firms, typically on a monthly basis. Credit reporting on an individual begins as soon as they enter into an agreement with a credit granting company that reports to one of the bureaus. Examples of these companies are banks, credit unions, credit card companies, and department stores (that have credit cards), but other “credit grantors” such as the gas and electric company will also report when you’ve missed payments.

Other ways that you can get a credit rating, although generally in a negative way, is to fail to meet an agreement that you have with a business. In this case, the company will often turn your “account” over to a collection agency where it will be reported as a “collection”, and negatively affect your credit rating. Examples of when this can happen are writing bad checks, getting behind on rent, or failing to meet your monthly payment on a cell phone agreement. There are many more instances when you fail to pay “on time” that can result in negative credit. One of the more negative is when a company sues you to recover their money this could result in a “judgement” which also reflects negatively on your credit rating.

But what does “negative credit” or a “negative credit rating” mean? Back in the day, it used to mean that you might have some accounts reported as paid slow, along with those that you paid on time, and the person reviewing the credit file made a decision as to your ability and willingness to pay based on the ratings on your report.

Today it is much different. Most creditors rely on a “credit score” calculated and provided by the credit bureau. It is this “score” that drives the creditor’s view on how high a level of risk you are for possible delinquency or even loss, and often a person isn’t even involved as the decision might be made by a software program. Your “score” will often determine the interest rate that you have to pay, most scores range between 450 and 750 and the lower your score, the higher the interest rate you will pay.

Therefore, whether you are young or old, you must either develop and protect a good credit score, or improve a poor one if you wish to get what you need or want at a reasonable cost.

But how do you do that? Let’s start with the young people that haven’t yet established a “credit score”. There are a number of things a young person can do to get off to a good credit start, and to avoid the pitfalls that can create a poor credit standing. The things to keep in mind are:

	Be responsible
	If you take on an obligation meet your word
		Paying every once in a while is not acceptable, if you committed to a monthly payment, then pay monthly
	If you have a problem, talk to the person you committed to
		A little communication goes a long way
	Avoid situations where you are responsible for others
		Such as signing for a cable bill that is being paid by your roommates
	Don’t bite off more than you can chew
		Be realistic in what you can afford
	Pay your obligations first each month
	Establish a relationship with a creditor that you can talk to
	Be responsible (repeated because it is always the best advice)

But what do you do if you’ve already registered some poor credit records? The first thing to do is to take a look at what your credit report is saying about you? Is it correct? Can you dispute it? You’ll want to get a copy of your credit report and review it with someone knowledgeable about credit reports, like someone at your credit union or other financial institution. You are now entitled to a free credit report from the three credit bureaus annually, and can begin this process by going to the internet site www.annualcreditreport.com.

Once you see what is on your credit report, you can dispute the inaccurate ratings and develop a plan to improve any negative ratings. This might include paying off judgments or collections, or making arrangements with governmental agencies or other creditors. Once you’ve taken some of these steps, your credit score can improve. An excellent web site for help in understanding credit reports and other credit issues is www.mymoney.gov.

Anything else you can do to improve your credit, or get a loan even with poor credit? Follow this advice:

	Be responsible
	Establish a relationship with a local financial institution
	Develop a relationship with someone on the staff that you can work with
	Borrow some money on a share secured loan, and make your payments on time
	Save some money so you have a good down payment if you plan to purchase something
	See if there is anyone willing to cosign for you
	Start small and meet your every word

When in doubt, contact a professional at your credit union and obtain assistance in looking at what your credit report says about you.