Resource

What affects my credit in Oregon?

Last updated: 10/29/2013

Knowing what affects your credit is essential to your financial health because your credit affects everything from your ability to get a mortgage, a car loan or even a job.

CONTENTS

1. What is a credit report?
2. How do I get my credit report?
3. How do I fix errors in my credit report?
4. What is a credit score?
5. How do I get my credit score?
6. What is a good credit score?
7. How do I build good credit?
8. Does cancelling my credit card hurt my credit score?
9. Does checking my credit report hurt my credit?
10. Does my credit card balance affect my credit?
11. Does missing my rent affect my credit? Utility bill, car payment, student loan payment, etc?

 1. What is a credit report?

Your credit report contains information on your financial behavior including how frequently you pay bills on time, how much credit you have available to you, how much credit you are using, what kinds of credit you use and your history of debt collections, debt settlements or bankruptcy. Three different companies called credit bureaus or credit reporting agencies control most people's credit reports. The three companies are Trans Union, Equifax and Experian.

 2. How do I get my credit report? 

Do not pay for a credit report. You can get a free credit report by visiting www.AnnualCreditReport.com or by calling 877-322-8228 . Through this site, you can get one free report per year from each of the three national credit reporting companies (Trans Union, Equifax and Experian). We highly recommend that you use this service to inspect your credit report on file with each of these companies. Many people find errors in their credit reports and errors can often cause you to be wrongfully denied a loan.

3. How do I fix errors in my credit report?

Errors on your credit report can cause you to be mistakenly denied a loan or charged a higher rate of interest.  First, do not go to a credit repair doctor or companies offering such services; they will just waste your money. Second, carefully document every error and do your best to gather evidence that proves it is an error.

The Federal Trade Commission (FTC) indicates the step-by-step process you can use to fix errors in your credit report. To get started, you can use a sample letter provided by the FTC here. Your letter should indicate exactly what information on your credit report is wrong and show the evidence you have proving it is wrong. Make copies of your evidence (such as receipts showing bills you paid) and include that evidence along with a copy of your credit report with your letter. Itemize each of the errors in your report, do not simply give a general description to cover all the errors. Next, request in your letter that the incorrect information be removed from your report or corrected. Before you send your letter, make sure that you have made a copy of your letter and any evidence you have included in the letter. Finally, send your letter to both the credit bureau and the lender or other information provider in question by certified mail, "return receipt requested", and keep your receipt because this will allow you to show that the credit reporting company and lender received your materials.

If you find an error or have a complaint related to credit reporting, you can file a complaint with the CFPB here.

4. What is a credit score?

Your credit score is a number that rates how likely you are to pay back a loan. Credit scores are issued by credit bureaus and used by lenders to determine whether or not to give you a loan. Your credit score is influenced by factors such as whether you have paid your debts on time, the amounts you owe, the length of your credit history (longer is better), how many new credit accounts you have opened recently and the variety in the types of credit you have used (mortgages, car loans, credit cards). As the Wall Street Journal and others have written, your best bet is to not focus on your credit score unless you are applying for a loan right now. Instead, focus on your credit report. Build a good credit history and fix any errors on your credit report.

 5. How do I get my credit score?

First, remember that your credit report—not your credit score—is the best way to know where you stand with your credit. Second, do not pay for your credit score. Lenders must, by law, provide you with a real score when you apply for a loan. This factsheet explains when you are entitled to getting a credit score or report. Third, if for whatever reason you want to check your credit score on your own, you can get an approximation of your score for free at CreditKarma.com. Beware other websites offering a "free" credit score because these pages often will encourage you to start trial offers that lead to monthly charges if you fail to opt out of them.

 6. What is a good credit score?

 The most common credit score is called FICO (Fair Isaac Corporation). Generally, a FICO score of above 720 is considered good, scores above 740 are considered excellent. On FICO's website you should beware of signing up for extra services like "credit monitoring." Again, the best place to start to understand where your credit stands is through your credit report—not your credit score.

 7. How do I build good credit?

The basic rules are simple. First, pay your bills on time. Second, pay down any debt you have such as on a credit card so that you do not use more than 30 percent of the credit made available to you. Third, check your credit report regularly and fix any errors you find. Fourth, only apply for the credit you absolutely need. Finally, build your credit slowly. We do not recommend that you apply for multiple credit cards at once.

 8. Does cancelling my credit card hurt my credit?

 Not necessarily. Start by asking two questions: 1) Will cancelling the card increase the percentage of your available credit that you use? 2) Is the card you want to cancel one of the oldest cards you have?

 If you can answer "no" to these two questions or if you can pay off the balance on your credit card before cancelling, then you may have good reasons to cancel a credit card, including avoiding fees and high interest rates or simply limiting your spending.

 Question 1). Cancelling a card that has a substantial amount of debt on it and moving that debt to another card can hurt your credit. If moving a debt from one card to another would cause you to use more than 30 percent of your maximum credit, it will hurt your credit. Consider an example in which you have two credit cards, each with limits of $2,000, and you have $600 of debt on each card. If you were to cancel one of those two cards and move the $600 in debt to the other card, you would be using far more than 30 percent of your available credit, and your credit would be hurt. In this case, you would be better off paying down your credit card debt before cancelling one of the two cards.

 Question 2). If you cancel a credit card that you have had for a long time in favor of a new card, your credit could be hurt because your credit history on the new card would be shorter than the old one.

 9. Does checking my credit report hurt my credit?

 No. In fact, you should definitely review your credit report on file at each of the three credit bureaus once a year. There is a chance that your credit report can be affected when other lenders obtain your credit report, which they will do when you apply for a loan or credit card. However, this is unlikely to be a problem unless you apply for multiple credit cards or other loans in a short period of time.

 10. Does my credit card balance affect my credit?

 Yes. If you are using more than 30 percent of your limit on any of your credit cards, you can hurt your credit. Second, if you reach or exceed your credit limit on any card, you will damage your credit. To avoid damaging your credit, do not use more than 30 percent of your credit limit.  

 11. Does missing my rent affect my credit? Utility bill, car payment, student loan payment, etc?  

 Missing any payment that you owe can negatively affect your credit and hurt your ability to borrow in the future. The best way to build and keep good credit is to always pay your bills on time, check your credit report regularly and fix any errors you find.

 Still have questions or need additional help with your credit?

 If you feel you need legal advice, you can look for consumer-oriented attorneys here. You can also submit questions you have to the Consumer Financial Protection Bureau here.

You can find more information about credit at the Federal Trade Commission's website

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