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How is Your Credit?

In this complex economic environment, it is essential to have a clear understanding of credit. There are a variety of ways to use credit—some of us use credit to stretch our resources and purchase high-cost assets such as a house or a car, while others use credit for daily purchases. Whatever the case may be, it is important to understand how credit impacts you. Remember, it is your responsibility to take an active role in educating yourself about credit.

What is a Credit Report?

Your credit report is an important tool in understanding how credit works. A credit report contains information about where you live, how you pay your bills, what loans you have taken out, and other information such as if you have been sued, arrested, or have filed bankruptcy.

Credit reporting companies legitimately sell the information in your credit report to creditors, insurers, employers, and other businesses. These organizations/businesses use your information to evaluate your applications for credit, insurance, employment, or a mortgage.

Checking Your Credit Report

Checking your credit report is one of the most effective ways to protect yourself against identity theft. All U.S. residents may monitor their credit report for errors and unauthorized use by ordering one free copy of their credit report each year from each of the three national credit reporting bureaus: Equifax, Experian, and TransUnion, at

If you find errors on your credit report, contact the credit reporting agency. They are required to investigate and respond to you within 30 days of your notification to them.

Credit Score

A credit score helps creditors determine whether to give you credit. Having a good credit score will allow you to secure loans with lower interest rates, lower insurance premiums, and can influence employment opportunities.

Ways to Improve your Credit Score Woman on Laptop

  • Pay your bills on time—late payments negatively impact your credit score
  • Limit the number of new accounts you open--opening new accounts does not necessarily improve your credit score
  • Length of credit history- keep accounts you’ve held the longest open & active—use at least every 6 months
  • Pay down debt and keep balances low. Part of your credit score is based on the amount of outstanding debt
  • Check your credit report by requesting your free credit report and report errors

Paying off Debt 

  • There are several things that you can do to help pay off debt:
  • Assess the problem--determine why you have a problem, develop a budget by tracking your spending and set a goal
  • Put your extra income into paying off debt, call creditors of the debt you are having difficulty paying and develop a new repayment plan
  • Use a tool such as PowerPay to help you develop a self-directed debt elimination plan

Seeking Help

If your debt becomes overwhelming, there are many resources to help. In Minnesota, the Department of Commerce regulates two types of firms offering credit repair services: credit service organizations and debt management companies. These firms must offer you a contract describing their fees and services, and they must register with the Department of Commerce. Before signing a contract with any firm, always check to see that they are licensed by visiting the License Lookup on the Commerce website.

Check to see if the firm is a member of a major association, such as the National Foundation for Credit Counseling or the Association of Independent Credit Counseling Agencies where the members are nonprofit agencies using certified financial counselors that meet certain quality and ethical standards using certified financial counselors.

What to Consider Before Choosing a Credit Repair Firm:

  • Avoid offers of a quick debt reduction or debt settlement plan with high up-front fees.
  • Beware that some fraudulent agencies will get away with using a non-profit status just to collect your money. Legitimate agencies should be willing to sit down with you and discuss your spending habits and help you come up with a budget.
  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short in a short time span or promises to reverse a bad credit score.
  • Work with a Minnesota licensee that has a local office with staff available to answer your questions

Want to Know More?



Credit Repair

Questions or comments--contact Julia Miller or Mary Jo Katras, Extension Educator.