Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 12, 2011

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One of the most important things that many lenders consider is your credit score, which indicates the borrower’s financial history and his or her ability to pay back debt. A bad credit score, while not a death sentence, can cause a plethora of problems when applying for or paying back a personal loan.

A credit report, though different companies can vary, usually contains the same basic information, which a lender uses to grant a personal loan. The first is the individual’s personal information; his or her name, Social Security number, date of birth, address and employment information. The second is information about all the accounts the individual has open, including auto loans, credit cards and mortgages, and the payment history for those accounts.

The third item is the individual’s history of credit inquiries, or the number of times he or she has authorized access to his or her credit score. The final piece of information is the individual’s negative items, including overdue debt, missed payments, legal suits and bankruptcies.

The first step in managing credit is to review his or her credit report and know his or her credit score, the most common of which is called a FICO score. It is important to check this report – most financial planners advise about once a year – but making inquiries more often than that can also be harmful. One of the important reasons to check this score periodically is to check for any errors and also for evidence of identity theft.

An individual can check his or her credit score in three ways: online (for free) at, by calling 877-322-8228 or by mailing a request form to Annual Credit Report Request Service at P.O. Box 105281, Atlanta, GA 30348-5281.

There are a number of simple measures an individual can take to maintain or improve his or her credit.

Some actions to avoid regarding your credit include opening multiple lines of credit in a short period of time, short selling a home, cosigning on someone else’s debt – especially if they stop making payments, consistently paying only the minimum payments on credit card bills, requesting his or her credit score too often and applying for cash advances from a credit card. These actions may not significantly reduce the borrower’s actual credit score, but they stand out as alarm bells for potential lenders.

To maintain a good credit score, good financial practices are usually sufficient. It is important to pay bills on time, keep outstanding balances low on credit cards, pay off debt and keep on top of all accounts.