Welcome to the world of credit reporting, that wicked flow of information zooming back and forth between anyone who's ever given you credit and anyone who's thinking about it. Want to see how fast that information can flow? Just go into a car lot, pick out a car and tell them you want financing. They'll have your credit rating in five minutes.
If you're worried about or just don’t know your credit rating, here are four ways to get started dealing with it.
- Get a copy of your credit report. You are entitled to a free credit report if you've recently been turned down for credit. Otherwise, it'll cost you 10 or 15 bucks (worth every penny if you're even thinking about someday needing a loan). The three major credit reporting agencies are: Equifax, Experian, and Trans Union. It doesn't make any difference which company you choose; they all have the goods on you.
- Read your credit report. If you have queries, call the credit departments of the relevant companies and ask for explanations of anything you don't understand. Look for notices of late payments. You might be surprised to see how often you've been late. You will be shocked to see not only every "late" payment in your life right there in black and white but also every degree of lateness.
- Note how late payments are categorized. If, for example, your Macy’s bill is due on March 5, 2003 and you don't pay it until April 5th, 2003 it goes into the "30-day-late" category on your credit report. At this time your payment would be considered 30 days past due. If you made your payment before April 5th but after the due date, you would accumulate a late charge and interest fees but it wouldn't affect your credit report until you hit 30 days past due.
Companies don't want the hassle of having to write letters, make phone calls and in general follow you to the ends of the earth to get the money you owe them. So if a bank sees those "90 days", it may very well turn down your mortgage application.
- Be sure your credit report is accurate. There may be, for example, an old notice on there from a time when you owed the government money and the IRS put a lien on your house. You want to get that lien notice removed from your credit rating so that no one looking at your report will think you're in debt to the government. Also, there are often cases when simple errors are made that can be easily cleared up with a few phone calls.
Your credit rating is like gold. Guard it with every ounce of discipline you can muster. In the meantime, if you've fallen behind, clean it up. Order the report and have a peak. It'll be eye opening, but you'll feel better for having taken that step. That's what dealing with debt is all about.