There’s a vast—and constantly growing—amount of information about how consumers use credit. And you can be sure that when you apply for credit, whether it’s as routine as asking for a new credit card or as significant as applying for a mortgage, potential creditors will check out your credit history.
The three major national credit bureaus—Equifax, Experian, and Transunion—collect two types of information about you. The first is how you use credit, from how much you owe on car loans, mortgages, and credit cards to the timeliness of your monthly payments. There’s an incredible amount of data that falls into this category— about two billion items a month, which breaks down to an average of 11 items per credit user.
Credit bureaus also store public information about you that might influence the way lenders evaluate your creditworthiness. This can include any- thing from records of bankruptcies and foreclosures to court judgments and divorce proceedings. But credit bureaus don’t gather any personal information that isn’t directly credit- related, such as how much you make, what you spend on rent or utilities, or anything you pay for in cash.
Credit bureaus make the information they’ve collected available—at a price— to creditors, banks, potential employers, landlords, and others who have a legal right to evaluate you based on your use of credit. Most information remains on your report for quite a while. Damaging activity can appear for up to seven years even if the account is closed or inactive. And bankruptcies can stay on your re- port for up to ten years unless the state where you live imposes a shorter limit.
Investing is about putting your money to work. If you do it wisely, you have the potential to increase your principal, or the amount you’ve invested, over time. The money your investments produce can mean the difference between meeting your financial goals and settling for what you can afford.
Investing isn’t the same as saving. When you save, you’re putting money in a safe place to earn interest—a bank account, for example. That’s fine for building an emergency fund or accumulating money for short-term goals. But your principal won’t grow much faster than the rate of inflation, or the gradual increase in the prices of goods and services. That can leave you short on buying power.
While there are always risks with investing, there is the expectation that over time you’ll beat inflation by a wide enough margin to achieve your financial goals.
Contributions from the book It’s Your Financial Life in this press release are used with permission from Light Bulb Press.