As a recent or soon-to-be college graduate, it is time for you to pay attention to your personal credit. Every consumer with debts will have a credit history, and you can make sure yours is well established right from the beginning.
There are three credit bureaus in the US: TransUnion, Experian, and Equifax. Each of these bureaus will compile a credit report about you, and they won’t necessarily be the same. Some lenders don’t report debts to all three bureaus, and if you have small debts like medical bills or the like, they may only show up on one of the three reports.
Typically the report has a few major sections:
This will include your name, including common abbreviations (e.g. if you have credit cards for “John Smith” and “Johnathan Smith” or “John Q. Smith”, etc.). You’ll also have your address information here. This section is important to verify; if you see information that is unfamiliar, then the credit bureaus may have mixed you up with another person with a similar name—this happens far more often than most people think.
If you have legal judgments, bankruptcy, unpaid tax liens, defaulted student loans, etc., then these records will appear here as negative items on your report. Most of these kinds of records can last 10 years on your report from the last reported activity, then they will drop off.
All of your open credit accounts will show up on your report, along with the most recent payment history. Your credit limits and balances will be included as well. If you have negative information here, like unpaid bills older than 90 days, those can remain on your report up to 7 years before they are removed.
If you had unpaid bills, like cable or trash collection, they may have been sent to collections. Other credit card accounts can also be sold to collection agencies. In this case, the information will be reported as a negative on your credit report and last for 7 years. It is sometimes possible to negotiate with collection agencies to have the negative removed if you pay off the debt.
Auto loans, mortgages, personal loans and etc. will also appear on your credit report. Again, if you have missed or late payments, they will be recorded as negatives and count against you for 7 years.
Any time your credit report is accessed, it is counted as an inquiry, and that is recorded on your report for 2 years. There are 2 kinds of inquiries, hard and soft. “Soft” inquiries include requests by you to see your own report and requests by creditors who want to send you pre-approved credit card offers. You might also see soft inquiries by employers, landlords, and other parties that do credit checks. “Hard” inquiries are any requests by credit grantors with whom you have made an application for credit or a loan. These inquiries have a small negative impact on your creditworthiness, and the more hard inquiries you have, the more your credit will suffer. So don’t fill out every credit card application you see!
Your credit report is crucial to your financial life. It is used by employers, landlords, lenders, service providers (like cell phone & utilities), and sometimes even by graduate schools to evaluate you. It’s important to ensure the report is accurate and reflects positively on you.
You are entitled to a free copy of your reports from each of the 3 major credit bureaus annually. Visit www.annualcreditreport.com to order your free reports online.