How Can I Go About Establishing Credit?

When you want to borrow money, you have to have an acceptable credit score in the eyes of the lender. Before you can get a decent credit score, you have to start the process of establishing your credit history. When you start out your adult life, you most likely have no credit history, and the proper steps must be taken to get the process started.

Open Bank Accounts

One of the easiest steps that you can take is to open bank accounts in your name. You should consider opening both a checking account and a savings account with a local bank. As long as you are over the age of 16 in most areas, you should be eligible to open a checking account. When you get your accounts open, you can start using the checking account to pay for things that you need. A good payment history will start to help you build credit.

Credit Cards

One of the most effective ways to build credit is to open a credit card account. Most credit card companies are willing to open a credit card with a small limit for you. Once you open a credit card, you can use it to make some small purchases. As soon as you make a purchase with your credit card and receive a statement, you should pay the bill off immediately. This helps your payment history and makes it look like you are responsible with money.

Be Responsible

If you want to establish good credit, you have to be responsible with your money. This means that when you use your bank account, you need to always have the money to cover the payments in your account. You have to keep track of how much money you have in your account at all times. When you use your credit card to make a purchase, you have to make your payment on time the following month. If you make late payments, it hurts your credit.

Store Accounts

If you have trouble getting approved for a regular credit card, you may look at opening some store accounts. For example, you could open an account with a retail department store and make some small purchases. Another option is to apply for a gas card with a gas station. These items are usually easier to get approved for than a regular credit card, and they also report to the credit bureaus on your actions.

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How to Contact Equifax Credit Reporting

There are two main reasons why you might want to contact the Equifax credit reporting bureau. You may suspect that someone is committing fraud and opening accounts in your name, or you may simply want to monitor your credit report. There is an appropriate way to contact with Equifax for each of these purposes. Using the right contact information will help your issue get resolved more quickly.

Instructions

Credit Monitoring

1

Visit the official website that provides free annual copies of your credit report (see Resources). It will allow you to choose a report from individual credit bureaus, including Equifax, or to order a report from all three major credit bureaus.

2

Select Equifax to contact its website and fill out the required information. You will have to enter identifying information about yourself and answer questions about your credit accounts to prove who you are. When this is verified, you will have access to your credit report.

3

Review your Equifax credit report and make a note of any incorrect information. If Equifax cannot verify negative information on your credit report, it must be removed. Contact Equifax through its dispute form to challenge any questionable items.

Fraud

4

Get a copy of your credit report by contacting Equifax through its website and review it for fraudulent accounts (see Resources). You are entitled to a free copy of your credit report at any time if you suspect fraudulent activity. Make a note of any accounts that were not opened by you and any other incorrect information.

5

Contact Equifax at 1 (888) 766-0008 to put a fraud alert on your credit report, or fill out its online fraud reporting form. This will alert lenders and creditors who make queries that your information has been used fraudulently so they can contact you before opening any new accounts.

6

Contact Equifax through its online dispute form to challenge any incorrect information. Equifax will investigate the disputes and remove them if they are due to fraudulent activity.

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When Do New Inquiries Post to My Credit Report?

When you apply for a loan, the creditor requests a copy of your credit report. This action, known as an inquiry, can negatively affect your credit score depending on how and with whom you shop for a loan.

What Makes Up Your Credit Score

Your credit score is a number between 300 and 850 that credit report agencies calculate based on various aspects of your financial history, primarily your tendency to make timely payments. The agencies account for the types of credit you have, how much of it is new, how much money you owe creditors and how long you've had credit. New credit accounts make up 10 percent of your credit score, which is why inquiries into your credit history matter.

Types of Inquiries

When you apply for a job, your employer may request a copy of your credit history. Businesses you don't know may also do this for their own reasons. These types of inquiries don't affect your credit score, while inquiries that result from you shopping for new credit do count. New credit includes credit cards, auto loans and mortgages. A single inquiry of this type can lower your credit score, typically by fewer than five points according to MyFICO, the consumer branch of FICO, the company responsible for the credit scoring system.

Time Restrictions

There are two ways a credit reporting agency may report inquiries, and a creditor can choose which to regard when evaluating you as a borrower. Both methods disregard credit inquiries that occur within the 30 days before you obtain a loan. The older of the two methods counts all credit inquiries within 14 days before this 30-day period as a single inquiry while the newer method does so for inquiries that occur within 45 days before the 30-day period.

Minimizing the Damage

To keep your credit score as high as possible, pay all bills on time, as your payment history makes up 35 percent of your score. You can find out your current score through a website such as FreeCreditReport.com, FreeCreditScore.com or FreeScore.com, all of which (despite their names) charge you a membership fee of usually $14.95 per month to view your credit score. Gather as much loan information from creditors' websites and brochures as you can before you apply for loans to minimize the number of inquiries on your credit history. Keep your application period within the 30-day limit to minimize the effects of inquiries on your credit score.

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What Is Consumer Credit?

Consumer credit is prevalent throughout today's economy, and consumers regularly use consumer credit as part of their daily purchasing habits. But what exactly is consumer credit, and what are its advantages and disadvantages for the consumer?

Consumer Credit Definition

Consumer credit is loosely defined as goods, services, privileges or money given to an individual instead of direct payment. Typically consumer credit is extended to an individual with additional interest owed beyond the borrowed or deferred payment amount.

Consumer Credit Types

Several common types of consumer credit include credit cards, retail store cards, motorized vehicle financing, personal installment loans and some retail installment or rent-to-own loans. Home mortgages are not typically considered to be strictly consumer credit because of the specific nature and regulation of the mortgage lending industry.

Function of Consumer Credit

Consumer credit functions to allow consumers to defer payment for purchases and repay with interest at a consistent and sometimes fixed rate. Many consumers use consumer credit to purchase higher priced goods and services like vehicles, home appliances, and home or auto repairs. Because consumers may not be able to readily access the cash required to buy these items outright, consumer credit allows the convenience of deferred payment. It is also common for many retail and impulse purchases.

Consumer Credit Advantages

Consumer credit enables consumers to use products and services while they are still paying for them without waiting until they've saved enough money for an outright purchase. Consumer credit types like credit cards and retail cards allow consumers to make purchases easily online. Successfully paying back consumer credit can build a favorable credit record, allowing consumers to take advantage of other investment or borrowing opportunities.

Consumer Credit Disadvantages

One disadvantage of utilizing consumer credit is that it reduces the tendency for saving money, which can leave families vulnerable if financial emergencies arise. In addition, because consumer credit options like credit cards are easy to use but involve relatively high interest rates, it is easy for consumer credit levels to get out of the consumer's control. A damaged credit rating from unpaid consumer credit can adversely affect a consumer's ability to obtain other personal or business financing.

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Companies That Provide Free Credit Report Information

The Fair Credit Reporting Act allows consumers to access their credit reports from the three nationwide reporting agencies for free once a year, according to the Federal Trade Commission. Beware of competing companies claiming to offer free credit reports -- they often force consumers into buying services or paying fees for the reports. Order your report from each of the three agencies or through the AnnualCreditReport.com website, which is endorsed by the FTC to give you the three free reports.

Experian

Experian is one of the three credit-reporting agencies authorized by the FTC to provide an annual free credit report to consumers. The company gives consumers online access to their credit reports for 30 days. Consumers can dispute incorrect credit information they find on their report online. Experian offers customer support over the phone seven days a week. Experian uses a 501 to 990 scale for its credit scores.

Experian

475 Anton Blvd.

Costa Mesa, CA 92626

714-830-7000

experian.com

TransUnion

TransUnion gives consumers a free credit report once a year. The company also offers "24/7 credit monitoring," meaning it will alert consumers if any suspicious activity takes place. If it does, consumers can submit a dispute online and monitor the dispute's status through TransUnion's website. The company also offers a personalized credit analysis of a credit report, allowing consumers to identify ways to improve their credit score. TransUnion credit scores run on a scoring model from 501 to 990.

TransUnion

2 Baldwin Place

P.O. Box 1000

Chester, PA 19022

1-800-888-4213

transunion.com

Equifax

Equifax gives consumers access to their credit report at no charge once a year. If consumers find an error on their credit report, they can dispute it using Equifax's online dispute website, which expedites the dispute process. Unlike Experian and TransUnion, Equifax uses a credit score range of 280 to 850.

Equifax

P.O. Box 740241

Atlanta, GA 30374

1-800-685-1111

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How Fast Can You Fix Your Credit?

Your credit rating is dynamic, changing as you use your credit cards, get loans and make or neglect payments on your accounts. Your rating gets bad rapidly if you spend too much of your credit limit or stop paying your bills responsibly. It takes longer to repair damage because creditors want to see lengthy good records, but positive actions are quickly reflected on your credit reports. You can often make significant progress within a month.

Revolving Account Balances

High revolving account balances give you a quick fix opportunity because your credit score goes up if you pay down a big amount. You should never spend more than 10 to 30 percent of your credit card limits if you want an optimal score, according to MSN Money columnist Liz Pulliam Weston. Your Experian, Equifax and TransUnion credit reports will reflect big payoffs within 30 days, quickly improving your appeal to creditors.

Credit Report Mistakes

Your credit reports may be among the 80 percent that have mistaken information, according to Bankrate.com. Errors in negative information can be fixed within 30 days under the Fair Credit Reporting Act. Get free reports from AnnualCreditReport.com, which hands out yearly copies to consumers on request. Find mistakes, submit online complaints through the credit bureau websites and wait for the results. The bureaus get a month to confirm or remove the data, and they alert you to the results and provide amended report copies at the end of their investigations. Look beyond obvious errors like current accounts reported as delinquent to things like under-reported credit limits, which hurt you by throwing off the difference between your balances and available credit.

Payment Dates

Your payment dates are vitally important to your credit score because they make up 35 percent of that number, according to the MyFICO credit-scoring company. You cannot immediately undo the damage from late payments, but catching up all your accounts is a good start. Their current status is reflected within 30 days and updated monthly as you continue to make on-time payments. Creditors see the old past-due information, but they also see a growing string of positive activity.

Warning

Ignore ads promising to fix your credit immediately, as the Federal Trade Commission warns that they are fraudulent. Credit repairers have no secret methods to erase bad credit bureau records. They can only file disputes using the same process you can do on your own. While they may help your credit within a month by getting rid of mistakes, they charge high fees to do what you can accomplish yourself at no cost. Some demand payment up front, which is illegal, then do nothing at all. Fix your credit on your own through disputes and building up positive records.

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How to Dispute a Negative Item in a Credit Report Letter

Credit reporting agencies (CRAs) such as Transunion, Experian and Equifax must strive to provide the most accurate information on their credit reports. When you find a problem with a negative account, you can dispute the information with the CRAs. Each credit reporting agency has an online dispute system that allows you to submit disputes. Once a dispute is submitted, the CRAs contact the creditor or collection agency responsible for the account data.

Instructions

Transunion

1

Navigate to the dispute center on Transunion's website.

2

Click "First Time? Click Here" if you have never used Transunion's online services before. Register for an account and go back to that page. Log in to your Transunion account on this page.

3

Click "Credit Report" from the navigational list at the top of the user control panel.

4

Click "Report Inaccuracy" underneath the main navigation options. Choose "Submit Dispute" to start the dispute process. You'll be presented with a list of your accounts. Scroll through this list until you find the account listing that matches your negative account on the paper credit report. Choose "Request Investigation." Use the provided reasons to dispute the account, checking the applicable reasons, or write your own. Click "Submit."

Equifax

5

Open your Internet browser and go to Equifax's online dispute Web page.

6

Find your credit report number on your paper Equifax credit report. Input this report number in the first field on the form. Provide the requested personal information in the other fields. Click "Submit." You will be presented with a list of questions regarding previous addresses, debt payments and credit accounts. Answer these questions to verify your identity and click "Submit."

7

Choose the "Start a new dispute" link. Use the sidebar navigation to get to the negative account section. Click "Dispute this item" next to the negative account from your paper credit report. Check each applicable dispute reason or present your own. Click "Add Dispute."

Experian

8

Navigate to Experian's dispute website.

9

Choose "Yes, I have a report number." Enter the number from your paper report in the provided field, and type in the rest of your personal information. Click "Submit."

10

Choose the negative accounts link running along the top of the credit report page. Click the name of the account to enter the account details page. Click "Dispute this item." Select the proper dispute reason or enter your own. Click "Submit your dispute."

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