Can Credit Card Offers Help You Build Your Credit History?

These are the four types of information on your credit report:

1. Basic identification information: Your name, address, previous addresses, marital status, Social Security number, spouse's name, dependents, employment information, etc.

2. Credit information: account numbers, names of creditors and banks, amount of your last payments on debts, credit limits on credit cards, whether your payments have been on time, and when they have been late or missing.

3. Public information: tax liens, court judgments, bankruptcies, etc.

4. Inquiry section: A list of all employers, creditors, banks, and others who have requested a copy of your credit report.

Often, people don't realize they have bad credit until they get turned down for a new credit card or a bank loan or something. Your credit report contains all the information that your previous and current creditors have passed along to the credit reporting agencies.

It stays on your report for seven years (10 years if it's a bankruptcy). But one study showed that about 30 percent of credit reports had major errors in them, and 70 percent have some kind of mistake.

There's no instant or easy remedy for negative comments on your credit report if they're accurate and current. So be skeptical of credit repair companies that promise they can eliminate bad credit history.

Warning signs of shady "credit repair" operations:

* They promise to have all negative information removed from your credit report. (It just isn't possible. If it's accurate and current, there's no way to remove it, sorry.)

* They charge a lot of money in exchange for their "services," and they want to be paid up front.

* They want you to contact the credit bureaus repeatedly to get verification of the information in your credit report, even though it's already been established as being accurate.

* They don't want to give you their address.

* They pressure you into making a decision right away.

All these companies can do is get rid of information that's not accurate or that is out of date. But the fact is, so can you. You don't need someone else to do it for you. Here's what you do.

First, contact any one of the three credit reporting bureaus -- or all three of them -- and request a copy of your credit report. If you've been turned down on a credit card offer or other line of credit because of bad credit, the bureau that supplied the report is obligated to give you a free copy of it, if you request it within 60 days of being turned down. Failing that, you can get a copy of your credit report for a small fee from any of the agencies.

Once you have your credit report in hand, scour it for accuracy. Look for flat-out mistakes, as well as for information that is accurate but old enough to where it shouldn't be included anymore.

If there's an actual inaccuracy - a charge you never actually made, or a late payment that you know was actually on time, for example - send a letter to the credit bureau informing of them of the error, and include as much backup information as you can indicating what the mistake is. After you do that, the ball is in the credit bureau's court. They must check with the creditor or bank that provided the information to see if it can be verified.

If the creditor can't verify it, or if they can't do so within 30 days, then the credit bureau is obligated to remove it from your credit report. What's more, after they've done that, they have to send a new, updated copy of your credit report to anyone who requested it within the last six months.

You may also find information that's accurate, but old. Bankruptcies can stay on your credit report for 10 years; other negative information can only stay for seven. If it's older than that, it has to be removed. That's why it's good to examine your credit report every year or so, to make sure things are being removed as they become outdated.

After you've done all this, there might still be negative elements on your credit report. In that case, you can write a statement (up to 100 words) of explanation for each negative item. It doesn't get the item removed, but your statement is included with your credit report. That way, people who request the credit report will see your side of the story along with it.

Students, new immigrants, and others who are just starting out in the life of credit often find a frustrating catch-22: People are hesitant to give you credit unless you already have credit. Some banks and lenders only want to ensure you have a source of income before giving you a credit card, but most want to examine your past, too, to make sure you have a good history of repaying debts in a responsible manner. But if you've never had a credit card before, you probably have no credit history, and that makes some lenders hesitant.

There are some ways you can start establishing good credit, though. Here are some:

* If you don't already have a checking or savings account (or both!), do so. You can use these to show that you have income and can pay your utilities and rent on time. They can prove you're a reliable person.

* Get a credit card at a department store, and then (of course) pay those bills on time and in full. That establishes good credit history.

* If you can't qualify for a credit card on your own, see about having someone cosign with you at first, until you get your credit history established.

* If you get turned down, investigate why and seek to clear up any misinformation.

There are several laws that aid consumers in establishing credit and maintaining the accuracy of their credit reports. Two major ones are the Equal Credit Opportunity Act and the Fair Credit Reporting Act.

The Equal Credit Opportunity Act seeks to ensure that woman have the means to begin their own credit histories and identities, separate from husbands or others. Under this law, information sent to credit bureaus must be in both the husband and wife's names if both use the account and/or are responsible for paying on it.

Prior to this act, it was often just the husband's name on the reports, and so in the event of a divorce or the husband's death, the wife found that she had no credit established -- even though she'd been at least partially responsible all along.

It can work the other way, too. If a woman gets divorced and her ex-husband is a bit of a deadbeat on some accounts, she can seek to demonstrate that his bad credit shouldn't reflect negatively on her.

The Fair Credit Reporting Act, meanwhile, provides that consumers have the right to know what in their credit reports and to have errors fixed promptly.

If you apply for a new credit card, for example, and are turned down, you have the right to find out from the credit card company which agency they got your credit report from. Then you can contact that agency and get a copy of your own credit report, to see what the credit card company saw.

The credit agency is required by law to help explain the report, too, as it can be confusing and complicated. Furthermore, if you request the credit report within 60 days of being turned down for credit, the agency cannot charge you for the report. (Otherwise, there is usually a fee.)

If you find an error in your credit report, the agency has to look into it and resolve it one way or the other within 30 days. They'll get a hold of the lender who gave them the information and ask them to verify it. If they can't verify it, or don't do so in a timely manner, then the item is stricken from your credit report.

If it turns out the negative information is accurate and current, you can still write a 100-word explanation giving your side of the story, which will be attached to your credit report so that future banks and creditors will see it.

So who has access to your credit report, anyway? If you're applying for credit, the potential creditor has a right to look at your credit report. Potential employers can look too, but only with your permission.