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Understanding Credit Reports


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Building a Credit History 

Building a credit history is important. A consumer’s credit history can affect their insurance, ability to rent an apartment, get a job, or get a cell phone plan. Credit history is needed to get all types of loans, from mortgages to department store cards. 

To start building a positive credit history, individuals should acquire and positively manage small lines of credit. The following are credit options for individuals who need to begin building a positive credit history: 

Father cosigning a student loan for his daughter

1.   Cosigner: For young adults (18 years and older), obtain a credit card with a parent or guardian as a co-signer. 
Co-signers on an account are equally responsible for the loan. Therefore, the loan is on their credit report as well, making a positive or negative impact depending on how the credit is managed. 

2.   Small loan from a bank: Acquire a small loan for an item for which the individual already has money available in a separate account. Then, set up automatic withdrawals to make the payments. Using a local bank or credit union where the individual already has a checking or savings account usually works best. 

3.   Obtain a secured credit card or loan: Secured cards and loans typically require a cash or collateral security deposit to ensure payment of the debt. The larger the security deposit or collateral, the higher the credit limit granted. The cash security deposit is returned when you close the account with the balance fully paid back. 

Tip: Before applying for credit, call and ask what the minimum requirements are. 

Credit Inquiries 

A credit inquiry is a request for an individual’s credit report. Inquiries are made by a variety of businesses that have a purpose to view a consumer’s credit report, such as insurance agencies, current and potential credit companies, financial institutions, landlords, and potential employers (with the potential employee’s permission). Different types of credit inquiries impact an individual’s credit score in different ways. 

Soft Inquiries    

Soft inquiries occur when the credit report is examined for informational purposes only, not for credit decisions. This includes when a consumer checks his/her own report, credit card companies pre-approving consumers for lines of credit, or pre-employment checks. Soft inquiries DO NOT affect an individual’s credit score. 

Hard Inquiries 

Hard inquiries occur when the consumer gives permission to a company to check their credit report when applying for additional credit. For example, if an individual applies for a new credit card, automobile loan, insurance, or opens a new cell phone account, the credit score will be impacted and the information will stay on the credit report for 2 years.


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American Consumer Credit Counseling (ACCC) provides non-profit credit counseling, debt relief, and debt elimination services for consumers nationwide. We offer free credit counseling to help consumers identify the right debt reduction program or debt solution for their unique situation. Since 1991, our certified credit counselors have helped thousands of individuals and families learn how to pay off a credit card balance and how to get out of debt fast through programs designed to payoff credit card debt within five years. Our debt management programs consolidate card credit debt payments and help reduce interest rates and finances charges, reducing the time it takes for getting rid of debt. And we offer comprehensive financial education services where consumers can get answers to questions like "How do I create a budget?", "What is debt consolidation?" and "How can I avoid debt in the future?"

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