What's in a credit report?
The typical consumer credit report includes four types of information:

Personal information: your name, spouse's name, current and previous addresses, Social Security number, year of birth and current and previous employers. This information is gathered from credit applications, so its accuracy depends on filling out the forms completely and consistently each time you apply for credit. Credit information: specific information about each account such as the credit limit or loan amount, balance, monthly payment and payment pattern during the past several years. This information comes from companies that do business with you. Public information: federal district bankruptcy records; state and county court records, tax liens and monetary judgments; and, in some states, overdue child support. Inquiries: the names of those who obtained a copy of your credit report for any reason. This information comes from the credit-reporting agency, and it remains on record for up to two years, consistent with federal law.

How to get a Good Credit Score
Everything starts with your income. The higher your income the more credit you can take on without a hit to your credit score. Additionally, higher income allows you to have more revolving credit outstanding without taking a hit to your credit score.

Another factor is the length of your credit history. In this case the longer your history, the better.

It's true, if you've had credit problems in the recent past, lenders consider you a higher risk borrower. However, overall creditworthiness is not just about formulas and credit scores. Credit scores take into account how much credit you currently have access to in relation to how much you earn. The score also reflects how timely you are in your payments, as well as, how much credit history they have to pull from. In the world of credit scoring, having less history makes you more risky and therefore lowers your score. Similarly, consistently paying bills late makes you more risky. While these factors lower your score somewhat, completely missing payments, defaulting on loans, or filing bankruptcy makes your score drop. Missing a credit card payment or two does not automatically mean that you're doomed to double-digit interest rates. The only sure way to know where you stand is to apply for a loan.

About Those Credit Cards
Keep your number of credit cards to 3 or less. Credit card limits reflect the total amount of revolving credit available to you. The more credit you have available to you, the less credit you will be able to qualify for. All of this contributes to a lower credit score.

Revolving credit includes department store cards, grocery store cards, gas cards, etc. Avoid signing up for cards that promise store discounts because that limit will be reflected on your credit score. Also, avoid taking the automatic limit increases. There is no need to have a high credit card limit that you never come close to. Your emergency credit card should have a limit under $10,000. High limits negatively affect your score, so keeping track of them can keep your score higher.

Payment History
Paying bills on time makes you a less risky borrower. Everyone makes mistakes, so don't expect that one payment you sent in three days late to show up on your score. Being chronically late, however, will ding your credit score.

Applying for Credit
Too many applications will also ding your credit score, but not by much. Remember, your credit score enables you to get credit, so don't go overboard avoiding all credit. When you do need to apply for credit, make sure all of the applications happen in a 30 day period. You only get one ding per 30 days because the companies expect you to use credit. This will not seriously affect your score unless you constantly apply for credit.

Maintaining a good credit score can save thousands in interest payments


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