AMERICANS NOW HAVE EASY ACCESS TO THEIR CREDIT REPORTS AT NO CHARGE, SO IT'S TIME TO START ... KNOCKING OUT YOUR DEBT.

Byline: Evan Pondel Staff Writer

Performing a credit check before filing a home-refinance application drove Emily Crosby to put away her credit cards.

After pulling copies of her credit history, the 55-year-old Fontana woman realized that high interest rates were creating a heavy economic burden. So she sought the advice of a financial adviser.

``And they told me to leave the credit cards behind,'' she said. ``Now I have consolidated my debt, and focused on budgeting instead of falling back on credit.''

A new law enacted this month allows consumers to obtain a free copy of their credit report every year from each of the three major credit bureaus - Equifax, Experian and TransUnion.

The reports essentially act like financial DNA, providing insight for lenders about the spending habits of future borrowers. Whether it's payment histories, a list of foreclosures and bankruptcies, or even the number of inquiries made by financial institutions, credit reports shed light on what you do with your money.

``From a general financial planning perspective, the more information you can have on yourself, the better off you'll be in the future,'' said Eric Glade, a senior financial adviser with American Express in Glendora.

Glade recommends that consumers take full advantage of the new law and get their credit report from each of the three bureaus.

Each bureau has records on perhaps as many as 1.5 billion credit accounts held by approximately 210 million individuals. Together, these agencies generate more than a billion credit reports each year, providing the vast majority of information for creditors, employers and insurers, according to the Federal Reserve. A study the agency cites found that consumers receive only about 16 million of the credit reports distributed each year.

Credit reports are generally self-explanatory. What isn't clear is how to improve your lackluster credit.

``The simple answer to that is when it comes down to improving your credit, it comes down to paying your bills on time,'' said Jim Tehan, spokesman for Myvesta.com, a nonprofit consumer-education organization.

In general, most credit lenders rely on scores to assess consumers' creditworthiness. Whether buying a car or financing a home, what is known as a ``FICO score'' is almost always tied to the interest rate on a monthly payment. The score is generated by Minneapolis-based Fair Isaac Corp., a publicly traded company that pulls information from the three major credit bureaus. Lenders access the score to determine a borrower's payment habits and the amount of outstanding debt.

FICO scores range from 500 to 850, and Tehan said the scores can be improved by keeping outstanding balances low. Credit histories can also be altered utilizing an Annapolis, Md.-based Web site called PayRentBuildCredit.com. The site allows consumers to create a credit history based on their recent rent and bill-payment activity.

Marty Gish, 25, from Claremont, said he drove his credit score well above 750 by ``working the system.''

``I took out several loans that I knew I could pay back right away. Each time I'd pay off the loan, my score would go up,'' he said.

The pitfall: Gish abused his credit power and now has to mitigate a mammoth load of debt. He said filing for bankruptcy may be his only option. ``So, I'm staying away from credit cards right now.''

Among other methods to build better credit: Sign up for a secured card, which requires you to open a savings account and deposit an amount that's equivalent to your credit line.

Even checking the due date on a credit card bill is important, as some companies ``will arbitrarily change the date to 20 days from 30 days,'' said David Schult, a personal-finance lecturer at California State University, Long Beach.

Oftentimes, credit-rating bureaus set a ratio that compares debt with annual income. Schult suggests that debt should be kept at about 10 percent or lower than your annual take-home pay.

Another precaution: Avoid credit surfing. Younger cardholders generally fall into this trap when bombarded with zero-percent APR offers. Schult said he hears about students signing up for a credit card for half a year, and then after six months have elapsed, they sign up for another one.

``That's not a healthy cycle,'' he said. ``You don't want to be jumping around from card to card. Soon, these companies may even raise their limit, and that could certainly throw your history off.''

Other fundamentals include applying for credit cards with reputable companies. That means MasterCard, Visa and American Express. Off-the-radar companies, ``could give you negative points,'' Schult said. ``Something most of us can't afford these days.''

Certainly owning a home, or consistently renting an apartment in the same location for a decade, can also gussy up your credit history.

But damaged credit isn't always the consumer's fault. Identity theft is a major culprit when it comes to foundering credit. And with privacy issues garnering concern across the nation, examining a credit report could help curb those who steal consumers' profiles.

``Because companies and other entities were able to gather information about consumers, it makes sense to me that consumers should be able to access these reports as a matter of policy,'' said James D. Likens, the Morris B. and Gladys Pendleton professor of economics at Pomona College.

When scrutinizing a credit report, payment history and use of credit are always telling as to whether someone is tampering with your account. The bottom line: Always look for payments that don't look right to you.

Jeff Stark, an investment adviser, has been keeping track of his credit history ever since his wallet was stolen a little more than a year ago while staying at a Los Angeles hotel. The culprit began using Stark's credit cards, incurring massive bills.

``I had to check my credit history until everything was cleared up. I still do upon occasion just to make sure everything is in order,'' said the 43-year-old.

But not all credit reports are created equal. In 2002, a joint study conducted by the Consumer Federation of America and the National Credit Reporting Association found evidence that the information included in credit reports of any given individual can differ widely across agencies. CSULB lecturer Schult said that should ``influence people to compare and contrast each report they receive.''

Despite these findings, there is no need to become stressed out about your credit report. Analysis published by the Federal Reserve in September said the number of consumers whose credit reports were affected by data problems ``appears to be small.''

Regardless, it is still in consumers' best interest to monitor their credit reports.

``When we consider the loss of privacy in American life, as a civil liberty you should have access to information, especially when it comes to your financial history,'' said Mary Ellen Gale, a professor of constitutional law at Whittier Law School.

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

CAPTION(S):

drawing, 2 boxes, 2 charts, map

Drawing:

(color) no caption (Knocked out credit card boxer)

Warren Husky/Staff Artist

Box:

(1) CREDIT CHECK

(2) IMPROVING YOUR FICO SCORE

Source: Fair Isaac Corporation

Chart:

(1) A HIGHER FICO SCORE SAVES YOU MONEY

(2) WHAT'S IN YOUR SCORE

Sources: Federal Trade Commission; credit agencies; Fair Isaac Corporation

Map:

Free credit reports coming your way

Source: Credit agencies

Associated Press