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Take steps to improve your credit score

Financial management experts recommend that you check your credit report once a year at least, and more frequently if you anticipate shopping for a loan or insurance quote. It's also a good idea to check it immediately if an unusual transaction shows up in a bank, credit card or other financial statement.

A credit report is not the same as a credit score, which is based on a credit report and intended to assess credit risks and reliability, said Carol Young, K-State Research and Extension financial management specialist.

A credit report is a record of your credit history that typically lists identifying information such as your name and address; existing credit; public records, such as any court judgments against you, and any tax lien owed on property. It may also contain information about a criminal conviction, which may stay on your credit report indefinitely, and inquiries about you from potential lenders and other businesses considering solicitations, Young said.

A credit report also will list personal financial service providers, such as the bank at which you have accounts and the type of accounts, credit card limits and balances, school or other loans and money management practices, such as bill paying history, including whether accounts are paid in full, or if only minimum payments are made and balances carried, she said.

A credit report is important because it allows potential lenders, insurers, employers, and others to obtain your information from credit bureaus to assess how you manage your financial responsibilities, said Young, who explained that lenders consider this information in deciding whether to issue a loan, and, if so, at what interest rate.

Insurance companies also may use a credit report to decide whether or not to issue a policy, and, if so, at what rate.

Prospective employers may use the information in weighing your dependability as an employee, and prospective landlords may use the information to assess worthiness as a renter, Young said.

"Accuracy is essential, and that's why it's important to check a credit report periodically," said Young, who advised checking your report at www.annualcreditreport.com--the only website authorized by law to fill free credit report orders.

AnnualCreditReport.com offers one free credit report every 12 months from each of the nationwide credit bureaus: Equifax, TransUnion or Experian. The website offers an Internet option, printable form that can be downloaded, completed and mailed, or toll-free number (877-322-8228) to request a free credit report from each of three providers.

Imposter sites offering "free credit reports" may require enrollment in a "free" trial subscription that turns into a fee-based service unless you cancel during a trial period, said the financial management specialist, who advised checking other credit report websites to make sure they represent one of the three major credit bureaus, and that the URL is accurate and secure before entering any personal information.

If you get an email, pop-up ad, or phone call seeking personal information, do not reply or click any link in the message. It's probably a scam, she said.

With the report in hand, Young advises checking the basics, such as the correct spelling of your name, address, Social Security number, and credit history, which typically includes credit card accounts, car loans, mortgages, and student loans.

A credit report also may include the terms of your credit, how much you owe your creditors, and your history of making payments, she said.

Errors can vary, said Young, who suggested the example of a credit card that the card holder had closed that is shown as open with credit available.

The error should be reported immediately, as such errors often can be cleared up fairly quickly.

If a loan payment or payments are in dispute, a customer will likely have to provide copies of proof of payment to correct the error, and that possibility serves as another good reason to maintain an organized recordkeeping system, Young said.

After taking the steps needed to correct an error, she advised asking for a corrected copy of the report.

"A credit report will typically reflect negative financial history for seven years; if a bankruptcy has been filed, it may stay in the records for 10 years," Young said.

For more information about credit reports and other credit issues, Young recommended checking the consumer information section at the Federal Reserve website: www.federalreserve.gov.

Why be a stickler for accuracy?

A credit score is derived from the information contained in a credit report, Young said.

Each credit reporting bureau will offer the opportunity to purchase a copy of your credit score, said Young, who advised paying attention to what kind of credit score is being provided.

While one common credit score is a known as FICO score (www.MyFico.com), agencies and financial service providers may maintain their own in-house scoring systems, she said.

"In drawing from credit reports to arrive at a credit score, agencies also will use varying formulas," Young said. And, while consumers are encouraged to seek a free credit report, credit reporting agencies charge a fee for a credit score. The fee is often under $15.

When paying for the score, be on alert for marketing efforts to push fee-based subscription services that you may not need or want, she said.

Generally, a higher credit score under any credit scoring system will reflect a history of paying bills on time and using credit responsibly. A higher score should help consumers qualify for lower interest rates.

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