Your Credit Report
If you've had trouble getting credit, then naturally you want to improve it. But the first thing you should do is check your credit report. Federal law lets you get a free copy if:

• you've been denied credit, employment or insurance within the last sixty days;
• you're unemployed and will apply for a job in the next sixty days;
• you're on welfare;
• you've received collection agency notification that their report to a credit bureau maybe, or has, negatively affected your credit rating;
• or you're a victim of credit fraud.

Equifax    800-685-1111
Experian    888-397-3742
TransUnion    800-888-4213

Whether you get your report free or buy it, paying to also get your credit score is a smart idea. Your credit report shows your credit history but a credit score shows how it compares to others. A credit score is a single number, computed from a formula which rates the strength of various credit report items. Companies use different formulas, but since they usually measure the same things, the scores are similar.

Since they keep separate records, it's possible your credit report is different for each credit bureau. Errors are also a problem and it has been estimated that about 70% of all credit reports have at least one error. Which makes getting more than one copy of your credit report, a wise move.

If you should find an error in your credit report, report it to the credit agency that supplied the report. They are required to investigate the disputed item, let you know their findings and correct the report if necessary.

How Creditors Decide You Have Good or Bad Credit
Credit scores were developed to give credit grantors an easy way to rate credit. But good creditors don't rely on scores alone to consider if someone has good or bad credit. Instead they use the three C's of credit; capacity, character, and collateral.

Capacity is the ability to repay a debt. Creditors will look at your occupation, how much you make, and how long you've had your job. They'll also check your expenses.

Character is your willingness to repay a debt. Creditors want signs not only that you can repay a debt, but that you will repay it. They look at your bill-paying history to see if you've paid your bills on time and whether you got overextended on a frequent basis. Recent history tends to count more, so keeping your present finances in order is seen as a good sign.

Collateral is security for a debt. The greater the credit granted and the poorer the credit, the more a creditor want's collateral. Collateral isn't always some type of asset, it can also be a cosigner who provides the creditor an additional source for debt repayment.

The Equal Credit Opportunity Act requires all credit applicants must be judged only on the basis of their financial qualifications. You can't be considered to have bad credit because of personal characteristics. So, your age, color, gender, marital status, national origin, race, can't be used as a reason for credit denial. And if you are denied credit, the ECOA also gives you the right to find out the specific reasons why.