Understanding Your Credit

We hear a lot about credit — credit reports, credit scores, credit freezes, credit monitoring. What does it all mean for you?

Your credit matters because it affects your ability to get a loan, a job, housing, insurance, and more. It’s important to understand what your credit is and how to protect it.

What is your credit, and why does it matter?

When people talk about your credit, they mean your credit history. Your credit history describes how you use money. For example:

• How many credit cards do you have?

• How many loans do you have?

• Do you pay your bills on time?

How you handled your money and bills in the past will help lenders decide if they want to do business with you. Your credit history also helps them determine what interest rate to charge you.

• If they see that you always pay your bills on time and never take on more debt than you can pay back, they will generally feel more confident doing business with you.

• If they see that you are late on your payments or owe more on credit cards or loans than you can repay, they might not trust that you will pay them back.

Who cares about your credit history?

Lenders, landlords, insurance companies, and potential employers are a few who might look at your credit history. Your credit history can make a big difference when you:

• apply for a loan or credit card

• look for a job

• try to rent an apartment

• try to buy or lease a car

• try to get rental or home insurance

Because these lenders, landlords, and others care how you handle your bills and other financial decisions, you might want to care about your credit, too.

What’s in your credit report?

Your credit report is a summary of your credit history. The three major credit bureaus — TransUnion, Equifax, and Experian — collect credit and other information about you. In your credit report, you’ll find information like:

• your name, address, and Social Security number

• your credit cards

• your loans

• how much money you owe

• if you pay your bills on time or late

• if you filed for bankruptcy

Other businesses pay the credit bureaus to use that information to check your credit. They run a credit check, for example, before they decide whether to lend you money, give you a credit card, or rent you an apartment.

TIP: The credit bureaus must make sure that the information they collect about you is accurate.

The Fair Credit Reporting Act (FCRA), a federal law, requires this.

But you want to check your credit report regularly to be very sure the right information is there.

Are you having issues on your credit report?

Contact our firm here or call us at 718-674-1245.