It's credit report time

In short - because what you don't know can hurt you.

An inaccuracy on your credit report could affect your credit score, which determines what interest rate you'll receive on credit cards, auto loans, mortgages and other credit.

"We recommend that people get their credit report at least once a year," said Natalie McKinnon, a credit counselor with Consumer Credit Counseling Service of Northern Nevada. "In this day and age, you don't know what kind of mistakes are being made."

Once overcoming the fear of the unknown, the process is simple and free.

Starting in 2005, Congress enacted a law to allow all Americans access to their credit report for free once a year. Consumers have access to their free credit reports online at www.annualcreditreport.com, or by calling 1-877-FTC-HELP.

The site then directs consumers to the three national credit reporting agencies, or credit bureaus: Equifax, TransUnion and Experian. Look at your credit report from all three bureaus. Not all creditors report to all three agencies, so the information may be inconsistent. Make sure that you first go through the federal Web site.

Norma Garcia, senior attorney for the Consumers Union, the nonprofit publisher of Consumer Reports, said the three credit bureaus don't make it obvious that you can go to the federal Web site first to get the free credit report. These, and other look-alike Web sites, will attempt to charge you for the report and additional services. Don't buy in.

What if there's a mistake on my credit report?

Contact the credit bureau in writing, Garcia said. According to federal statute, the credit bureaus must process corrections within a certain period of time.

Visit http://www.consumersunion. org/issues/creditmatters.html for the online guide of "Your Credit Matters," on how to successfully submit a complaint.

Why do I need to know my credit score?

A credit score is a number that helps lenders and others predict how likely a consumer is to make credit payments on time, according to the Consumer Federation of America.

It's developed from information on your credit report. The report is free; the score is not. Consumers can purchase their credit score from each credit bureau while accessing the report, or after. This is one thing the bureaus can charge you for, so they give you lots of opportunities to purchase it.

"The credit score is used to evaluate whether you qualify for any credit that you are applying for," said Jean Ann Fox, director of consumer protection for Consumer Federation of America.

Your score determines how big a deposit you have to pay for telephone, electricity or natural gas service. Lenders use your score when deciding to offer you a low interest rate, or credit limit on a credit card.

The Fair Isaac Corporation, or FICO, credit score is most often used by lenders. Its credit score ranges from 300-850. Equifax charges $6.95 for the credit score. TransUnion offers a credit score for $5.95. Experian charges $5.

What things affect your credit rating?

The big two: if you have a history of paying late and how much you owe. Those factors alone affect 65 percent of your score.

"They'll see how much open, revolving credit you have and what's your potential to use it," said credit counselor Natalie McKinnon. "If you have too much (credit) you may want to consider closing some of the newer accounts you have opened."

Closing the older credit card accounts could make the situation worse.

"When things drop off in seven years that means your length of credit history is shortened," she said.

A long history of well-managed credit works to your advantage more than credit with a short track record.

The five parts to your FICO credit score:

1. Your payment history, 35 percent of your score

Have you paid your credit accounts on time? Filed for bankruptcy?

2. How much do you owe? That's 30 percent of your score

3. Length of credit history, 15 percent of your score

A longer credit history will increase your score.

4. New credit, about 10 percent of your score

Have you recently applied for, or opened, new credit accounts? This will be weighed against your credit history.

5. Various factors, about 10 percent of your score

Several minor factors influence your score, such as,having a mix of credit types on your report.

-Source: Consumer Federation of America and FICO

How do I improve my credit score?

It takes awhile if you have a bad record, said consumer advocate Jean Ann Fox.

"The rule of thumb is to pay every bill on time and not max out your available credit limit," she said. "It's better to have three credit cards that you only use up to half of the limit on than to have one that you max out every month."

Fox said lenders are determining how much borrowing capacity you have, meaning how close you are to the credit limit.

What if I'm too far gone?

It's never too late. For more tips visit the Consumer Federation of America site at www.consumerfed.org/publications.

Need personal attention? Call Consumer Credit Counseling Service of Northern Nevada at 322-6557. It has a Carson City office open on Thursdays. Counselors work with consumers to get their interest rate reduced on outstanding debt and their late fees and overlimit fees stopped. Banks also provide debt counseling for members.

n Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.