2) Explaining What Good Credit is EXACTLY

Good credit should not be a mystery. It is actually very straightforward. Financial institutions pay a credit bureau to compile information about consumers. These reports are similar to high school and college grade transcripts--instead of collecting grades, credit bureaus collect credit information. There are three credit bureaus that compile information about your credit history. They are Equifax, Experian and Trans Union.

The types of information collected includes, timeliness of payments, lines of open credit, credit limits, type of loans taken out, credit inquiries and any judgments. This will be made more clear when you see this example.

Issuer Credit Line Balance Payment History
Citibank Visa $2300 $345 111112xx111132
First Card $1000 0 111xxxxxxxxxxxxx
Discover $700 0 11111111111111

As you can see, the credit report lists the lines of credit and who the creditor is. Credit lines are also listed. Payment history is also tracked. "x" means inactive for that month, "1" signifies an on-time payment, "2" signifies 30 days late, "3" signifies 60 days late, and so on. Your goal should be all "1's".

To get good credit, you should:

  • Keep your own checking account and savings account
  • Get a copy of your credit report (see below)
  • Establish a credit card in your own name. Most college students at four year schools are approved easily.
  • Pay bills before the due date
  • Know how a loan officer looks at your credit report

To find out what the credit bureaus have compiled on you, you can write them at:

Experian Consumer Assistance - For a free report, call 1-800-682-7654 or write them at
P.O. Box 2350
Chatsworth CA 91313-2350

Trans Union Consumer Relations - For a copy of your report call 1-800-851-2674 or write
P.O. Box 7000
(There is a processing fee.)

Equifax Credit Information Services - For a copy of your report call 1-800-685-1111 or write
P. O. Box 740241
Atlanta GA 30374-0241
(There is a processing fee.)

Ways credit bureaus can make mistakes:

  • your dad has the same name
  • relative with a similar name
  • relative with a similar social security number
  • anyone with similar name or social security number

The "Fair Credit Reporting Act" protects you from incorrect information hurting you. If you find that you are getting turned down for credit and think that there's something fishy, you should get a copy of your report. You have the right to challenge incorrect information.

Next we'll learn to use a credit card as a financial tool...