Credit reports enable lenders to offer a risk-based price when they give credit, says Norman Magnuson, vice president of public affairs of Associated Credit Bureaus, the trade association for the credit reporting industry. If you’re a good risk, you’ll be offered a competitive interest rate. If not, you’ll be charged higher interest rates. Here are some ways to ensure that your credit report is the best possible reflection of your financial situation:

• Pay your bills on time. Most lenders will report a delinquency to the credit bureaus if a payment is 30 to 60 days late.
• Open lines of credit—whether you carry a balance or not—can negatively affect your credit rating. Cancel all open lines of credit. such as credit cards, if you’re not using them.
• Every time you apply for credit, it is reported to the major credit bureaus. Even if you make timely monthly payments to lenders, applying for credit too often can hurt your credit rating.
• Mistakes can happen. Check your credit report regularly and address any discrepancies with the credit bureau. This is especially important if you will be applying for a loan in the near future.
• Tear up unsolicited pre-approved credit applications before throwing them away to prevent thieves from getting a card in your name.

Finance

Tags: risk- based price credit