The Federal Trade Commission (FTC) recently updated one of its most popular and helpful resources for consumers, the Build a Better Credit Report guide, a simple and easy-to-read guide available at ftc.gov. The guide explains in question-answer format how credit scores work, why it’s important to access and dispute any errors on a credit report, as well as how your credit score can affect your ability to get a loan, a place to live, and even employment.
Additionally, the guide explains how to get a free credit report each year, how long negative information will show up on your report, what factors affect a credit score – as well as important information about fraud alerts.
Factors that Affect Credit
In this section of the guide, consumers learn the four types of information that determines your credit score:
1. Paying bills on time – payment history is a significant factor in determining credit worthiness. If you have paid bills late, been referred to collections or declared bankruptcy, any or all of these factors can negatively affect your score.
2. Maxing out credit cards - If the amount you owe on your credit cards is close to the maximum limit, it can have a negative effect on your score.
3. Length of credit history – An insufficient credit history or none at all can make it difficult in some cases, however keeping low balances and paying bills on time can help keep an insufficient credit history from hurting your score.
4. Excessive applications for credit - Applying for multiple accounts within a certain time span can negatively affect your credit score.
The guide also notes that if you are having trouble paying your bills, to contact your creditors before the account goes into collection to get help in repaying your debt; if you wait until after collection has begun, creditors may not be as willing to assist you.
Learning about Fraud
With scams being widespread, another important component of the guide is the section on fraud and fraud alerts. This section explains what a credit freeze is, also known as a security freeze, which can make it more difficult for identity thieves to open accounts in your name. The section also explains the three types of fraud alerts, including an active duty military alert, and what to do if you suspect fraud on your credit report.
How to check your credit
All consumers, including servicemembers are allowed one free credit report, once a year at annualcreditreport.com Additionally, active servicemembers can get a free credit score when you sign up for the Military Saves pledge, courtesy of FINRA education foundation.
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