Reading a Credit Report

If you can think of anything that might reflect badly on how creditworthy you are, chances are it’s already in your credit report. From new credit cards you haven’t used yet to more substantial issues, like a repossessed car or unpaid college loan, credit reports cover a breadth and depth of information that can be staggering—and somewhat alarming.

The trick is to be sure that creditors will like what they see when they check your report. The good news is that you can improve your chances of getting approved if you review your report ahead of time. That way you’ll have time to correct any mistakes and clear up any outstanding problems with payment histories.

A general rule of thumb is that the more credit you’re planning to apply for, the sooner you should take a look at your report. If you want to rent an apartment or get a new credit card, check just before you apply to make sure the information on your report doesn’t cause any unnecessary delays. If you’re applying for a mortgage, give yourself at least three to six months to sort out any problems and put your best foot forward.

Getting a Report

Everyone is entitled to a free credit report from each of the national credit reporting companies each year, thanks to the FACT Act. You can ask for all three at once or one every four months, either online at www.annualcreditreport.com or by calling 877-322-8228. Spreading out your requests is probably smart, so you’ll know quickly if there’s a problem. You’re also entitled to a free report if you’ve been denied credit, employment, or insurance within the last 60 days.

You may be offered free credit reports directly from the credit reporting agencies, or from organizations with names that sound like annualcreditreport.com but aren’t. In most cases, you’ll find that there are strings—and costs—attached.

To the Limit

If you’ve never had a card before, chances are the credit limit you’re offered will be pretty low to start. But as you use a card, the company will probably increase the amount it will allow you to charge. And once you’ve got one or two cards, you’ll find yourself getting card offers with higher and higher limits. That’s because your use of the credit identifies you as someone companies can trust to spend money—which means you can probably make money for them.

Credit card companies don’t offer you higher credit limits as rewards for good behavior, or because having access to more money is always in your best interest. That’s why you don’t have to waste any energy worrying that a card issuer might cut off your credit, or cancel your card, because you owe them money. In fact, as long as you don’t default, or stop paying what you owe, the more you owe them, the happier they’ll be. That’s exactly why they go looking for your business in the first place.