Introduction to Consumer Credit

When you apply for a car, personal, business or mortgage loan, lenders rely on your credit score to determine whether to lend you money, and at what interest rate.

Credit Bureaus

Not using credit wisely can hurt your credit score.

Three national credit bureaus--TransUnion, Experian and Equifax--compile credit reports on consumers. If you miss payments, pay bills late or file for bankruptcy, it's on your credit report.

Credit Score

Before approving your auto loan, lenders will study your credit score.

Fair Isaac Corp., a California-based company, invented the credit score---usually referred to as a FICO score---based on the information in your three credit reports.

Negatives

Bankruptcy filings will dramatically hurt your credit.

Paying bills late or not at all and having too many open credit card accounts negatively affect your credit. Depending on the type, bankruptcy can lower your credit for 10 years, according to MSN Money. Having a large amount of revolving debt also hurts your credit.

Repairing Your Credit

Pay your shopping bills on time to boost your credit.

You can fix bad credit by paying your bills on time, lowering your debt and closing unneeded credit card accounts.

Expert Insight

Correcting errors on your credit report can save you money in the future.

Consumers can order one copy of each of the three credit reports every 12 months at no charge at AnnualCreditReport.com. If you find errors in your reports---such as a missed bill you know you paid on time--report the mistake in writing to the credit bureaus.