You wouldn't loan money to someone you don't trust, would you? Well, financial institutions (such as banks, mortgage companies, finance and credit card companies) are just as cautious, if not more so. They want to know that the people they lend money to are reliable and will make good on their promise to pay the debt on time and with interest.

Lenders and other service providers will look carefully at your credit report and your FICO score - a computer-generated number that indicates to lenders what kind of credit risk you are, and then base the interest rate they will charge you on that report. If your credit rating is poor, you could end up paying thousands of dollars in addition interest charges. The interest rate that you are charged for personal loans, mortgages, etc, is based on your FICO or credit report. The more of a risk you are seen to be, the higher the interest you will be charged. So, by fixing your credit rating asap, you could save yourself a lot of money.
(See below for more information.)

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Each individual's credit file includes general information on where they live and work; how they pay their bills and whether they have been sued, arrested or have filed for bankruptcy. Credit bureaus also collect and sell information including:

. Identification and employment information. Your name, birth date, Social Security number, employer, and spouse's name. Other information may also be made available to creditors who request it including your employment history, income, previous address and details on home ownership (if you own, rent, or live at home for instance).
. Payment history. This includes details on which creditors you do business with, how much credit they have extended to you and whether or not you pay the bills on time. Information on overdue accounts and collection agency referrals may be listed.
. Inquiries. A list of all creditors who have asked for your credit history within the past year as well as a list of companies who have requested your credit history for employment purposes within the past two years.
. Public record information. Events of public record such as bankruptcies, foreclosures, judgments and tax liens.

Credit bureaus sell information that banks and other lending organizations use to determine if you are credit worthy. That is why is it essential that your know your what your credit reports are saying about you.

If your credit report is poor, you can take steps to improve it. Keep your revolving debt as low as possible paying all of your bills on time and applying for credit only as you need it. Experts agree that checking your report regularly and identifying errors is the best way to ensure you get the credit and interest rates you deserve.