Each time you apply for a loan, whether for a car, house or for personal expenses, you have to essentially submit to a financial background check, or credit check. When the lending institution sends out queries about your credit to determine if you can pay back the loan, there are three major credit bureaus that the query will go to: Equifax, Experian and TransUnion. One of these three, or all three, credit bureaus will compile all of your financial information, including all of your debt and income, and translate this into whether or not you are a good risk for a loan. They send this information in to the bank, who then assesses the pros and cons and ultimately decides whether or not they want to give you a loan.
If you want to know how to work with the three major credit bureaus to get your credit in better shape, you need to begin with your financial reputation. This means if you have any outstanding debt, you must try to pay it off more quickly, as late debt can lower your score. First, you will need to try to get copies of your credit history at one or all of the three major credit bureaus, as this will at least let you know where you stand and how to begin to improve your score. If you find discrepancies, you need to get it straightened out as quickly as possible in order to get an accurate score.
Although some people think getting a new credit card and paying it off on time may improve your score, the last thing you need is more debt, so do your best to avoid this type of spending while trying to clean up your credit.
If you do currently have credit card debt, this should be the first thing you attempt to pay off, as this is an unsecured debt. Essentially, credit cards are not the “good” type of debt that a house payment would be, and will eventually drag your scores down.
The main thing you can do with the information provided by a credit bureau is to begin contacting any institutions where you have outstanding debt and try to reduce the debt or make new payment arrangements. The more money you owe, the less likely you are to have a good score, so let a credit institution help show you what can be paid off for the maximum benefit.
Remember, if you are in debt, it did not happen overnight and it will also take some time to repair. If your credit is good, the credit bureaus can still be useful, as they can keep you up to date on your financial reputation and standing. A word of caution, however; the more often you check on your score, the more you can actually lower it, so use care. Getting loans usually requires a good credit history, so do your best to keep your finances on firm ground with financial reports from one of the three major bureaus.