Building Up a Good Record
On your first attempt to get credit, you may face a common frustration: sometimes it seems you have to already have credit to get credit. Some creditors will look only at your salary and job and the other financial information you put on your application. But most also want to know about your track record in handling credit--how reliably you've repaid past debts. They turn to the records kept by credit bureaus or credit reporting agencies whose business is to collect and store information about borrowers that is routinely supplied by many lenders. These records include the amount of credit you have received and how faithfully you've paid it back.
Here are several ways you can begin to build up a good credit history:
-- Open a checking account or a savings account, or both. These do not begin your credit file, but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show you pay utility bills or rent regularly, a sign of reliability.
-- Apply for a department store credit card. Repaying credit card bills on time is a plus in credit histories.
-- Ask whether you may deposit funds with a financial institution to serve as collateral for a credit card; some institutions will issue a credit card with a credit limit usually no greater than the amount on deposit.
-- If you're new in town, write for a summary of any credit record kept by a credit bureau in your former town. (Ask the bank or department store in your old hometown for the name of the agency it reports to.)
-- If you don't qualify on the basis of your own credit standing, offer to have someone cosign your application.
-- If you're turned down, find out why and try to clear up any misunderstandings.
What Laws Apply?
The following laws can help you start your credit history and keep your record accurate:
THE EQUAL CREDIT OPPORTUNITY ACT gives women a way to start their own credit history and identity.
THE FAIR CREDIT REPORTING ACT sets up a procedure for correcting mistakes on your credit record.
Credit Histories for Women
Under the Equal Credit Opportunity Act, reports to credit bureaus must be made in the names of both husband and wife if both use an account or are responsible for repaying the debt. Some women who are divorced or widowed might not have separate credit histories because in the past credit accounts were listed in their husband's name only. But they can still benefit from this record. Under the Equal Credit Opportunity Act, creditors must consider the credit history of accounts women have held jointly with their husbands. Creditors must also look at the record of any account held only in the husband's name if a woman can show it also reflects her own creditworthiness. If the record is unfavorable--if an ex-husband was a bad credit risk--she can try to show that the record does not reflect her own reputation. Remember that a wife may also open her own account to be sure of starting her own credit history.
Here's an example:
Mary Jones, when married to John Jones, always paid their credit card bills on time and from their joint checking account. But the card was issued in John's name, and the credit bureau kept all records in John's name. Now Mary is a widow and wants to take out a new card, but she's told she has no credit history. To benefit from the good credit record already on the books in John's name, Mary should point out that she handled all accounts properly when she was married and that bills were paid by checks from their joint checking account.
Keeping Up Credit Records
Mistakes on your credit record--sometimes mistaken identities--can cloud your credit future. Your credit rating is important, so be sure credit bureau records are complete and accurate.
The Fair Credit Reporting Act says that you must be told what's in your credit file and have any errors corrected.
Negative Information. If a lender refuses you credit because of unfavorable information in your credit report, you have a right to the name and address of the agency that keeps your report. Then, you may either request information from the credit bureau by mail or in person. You will not get an exact copy of the file, but you will at least learn what's in the report. The law also says that the credit bureau must help you interpret the data--because it's raw data that takes experience to analyze. If you're questioning a credit refusal made within the past 30 days, the bureau is not allowed to charge a fee for giving you information.
Any error that you find must be investigated by the credit bureau with the creditor who supplied the data. The bureau will remove from your credit file any errors the creditor admits are there. If you disagree with the findings, you can file a short statement in your record giving your side of the story. Future reports to creditors must include this statement or a summary of it.
Old Information. Sometimes credit information is too old to give a good picture of your financial reputation. There is a limit on how long certain kinds of information may be kept in your file:
-- Bankruptcies must be taken off your credit history after 10 years.
-- Suits and judgments, tax liens, arrest records, and most other kinds of unfavorable information must be dropped after 7 years.
Your credit record may not be given to anyone who does not have a legitimate business need for it. Stores to which you are applying for credit or prospective employers may examine your record; curious neighbors may not.
Billing Mistakes. In the next chapter, you will find the steps to take if there's an error on your bill. By following these steps, you can protect your credit rating.
