It’s easy to get a credit score, the trick is to get a good one.
Every commercially active adult ends up with a credit report and credit score between a terminal zero and a pristine 1000, simply by dint of living an ordinary life.
According to Keith McLoughlin, managing director of credit bureau Centrix, it’s an urban myth that young people starting out in life have to incur debt to get a credit report.
“Even if you’re only applying for one job, you can end up with a credit score,” McLaughlin says.
“Normally people don’t go out to get into debt to get a credit score,” he says.
Credit reports and credit scores are generated when people request services as varied as renting a home, getting a cell phone plan, or signing up for a apartment, he said.
Individuals have no choice for this to happen.
Upon request, the homeowner, utility company, or telecom operator can complete a credit check with one or more credit bureaus, such as Centrix and Illion, to see if they are the kind of person they want as a customer.
If the person they’re checking doesn’t have a credit report, just checking requires the credit bureaus to create one, McLaughlin says.
Credit bureaus are commercial monitoring networks, with banks, insurers, power companies, landlords, telecommunications companies and lenders providing them with information about each of their customers.
The goal is to compile credit reports on each that show how financially responsible they are.
Companies like banks and power companies have the right to pass on information, such as when individuals miss scheduled payments on accounts, from contracts that their customers have no choice but to accept. .
McLaughlin says that to balance this power to pass on information is the right of individuals to check their credit reports online for free, to verify that the information about them is correct.
That’s important because maintaining a decent credit score takes care, he says.
An average score of 500 to 699 is the minimum territory a person who wants easy and cheap access to credit and services should stay in.
Having a decent credit score can also be important for young people applying for jobs, as some employers who hire people for money management roles run credit checks on applicants, McLaughlin says.
McLaughlin says the way to maintain a decent credit report and credit score is to make all your payments on time.
But black marks on credit reports can come out of left field, and young people need to know where the risks lie, McLaughlin says.
Flatterers in particular should be aware that poor roommate behavior could tarnish their own credit records, he says.
Being co-named on a power account, for example, often means one person is responsible for missed payments, even if someone else in the apartment was responsible for the non-payment.
“It’s a joint and several liability,” McLaughlin says.
People who apply for multiple loans will also see this information logged, and too many applications could cause someone’s credit score to drop slightly, he says.
However, not all loan or service requests result in a credit check or transmission of data to credit bureaus.
The student loan system isn’t plugged into offices, so missed student debt payments don’t leave a dark mark, McLaughlin says.
WHAT’S IN A CREDIT REPORT?
Credit Simple, which got into trouble last year for using people’s credit information to market services to them, lists the information kept in
- Personal Information: Your name, date of birth, address and previous addresses
- Accounts: including mortgages, credit cards, personal loans, and power accounts that each person has.
- Payment history: Your credit report includes details such as the amount owed on each account and a breakdown of your payment history.
- Inquiries: Every time a person applies for a loan or an account, it is recorded.
- Default: All overdue payments of at least 60 days are recorded.
- Judgments: Publicly available court records relating to your debts.