IN GRADUATE school, I had two friends - one raised in Scotland, the other in Mexico - who wanted to escape the dorms and get an apartment. They managed to find the perfect two-bedroom with reasonable rent, but there was a hitch.
The landlord wanted six months' rent upfront because they had no credit history in the United States.
As my friends discovered, credit reports play a significant role in your ability to achieve any number of financial goals.
Landlords and mortgage lenders will require a credit report before you move in. Employers increasingly use them to screen job candidates to help assess trustworthiness and responsibility (they first have to ask you if they can do a credit check). And insurance companies consider the reports in calculating how many claims you're likely to make.
Your credit history "has more of an impact on your financial future than any degree you receive," says Gerri Detweiler, author of The Ultimate Credit Handbook (Plume; $15).
The longer and better your history, the less risky you appear, making credit easier to get, and cheaper to boot.
Experian (www.experian.com), Equifax (www.equifax.com) and Trans Union (www.transunion.com) are the three major credit bureaus. While there are different ways to calculate credit risk, they report a FICO score. Ranging from a low of 300 to a high of 850, the FICO score is drawn from data in your report and helps lenders compare you to others.
About half the U.S. population falls within the 700 range, according to Fair Isaac Corp., which designed the FICO scoring system. As you inch below that range, you'll start facing penalties.
Younger people may have lower ratings simply because they don't have a long credit history.
Fair Isaac announced Tuesday that it is developing a new score based on "nontraditional sources of data," ranging from how well consumers handled payday loans and retail payment plans to whether they used overdraft protection on checking accounts responsibly.
Rent data could be included in the future. The company said that among lenders showing interest in using the new system, which has yet to be implemented, are mortgage and auto lenders as well as companies that sell wireless phones.
In the meantime, you can build up a record by making purchases with a credit card that you can comfortably pay off every month and making regular, on-time payments on other debt, such as student loans.
If your accounts are less than 6 months old, you won't even have a FICO score. As an alternative source, sign up at PayRentBuildCredit.com, which allows you to build up credit through your payment record with landlords, utilities and other companies.
Your payment history has the largest impact on your score. Late payments - 30 days or more past due - stay on your report for seven years.
Detweiler says many people find their credit wrecked from health-club memberships, cell-phone bills and medical expenses that were not canceled or paid off appropriately.
Bankruptcy will generally mark your report for 10 years, and unpaid court judgments or tax liens can remain indefinitely.
Don't despair. A credit score always is a work in progress, so even if you're past due one month, your score will improve as you begin to make payments on time again.
Linda Sherry of Consumer Action, a nonprofit consumer advocacy group, also offers these tips:
Keep credit-card account balances to no more than 50 percent of your total debt, and whittle away existing loans.
Never co-sign an account with a friend or relative.
Review your credit report every year to check for errors. Maryland residents are entitled to free copies annually.
And to learn more tips about credit, go to www.myfico.com or Consumer Action's Web site, www.money-wise.org.
E-mail Carolyn Bigda at yourmoneytribune.com.