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The Credit Machine -- Your financial actions - good or bad - are the

When Ron and Mary Kiefner of Germantown Hills went to apply for a truck loan last summer, the only thing between them and the money was the formality of checking their credit history.

"We knew we would get the loan because we have always paid our bills on time," recalled Mary Kiefner, director of nursing at Illinois Central College. Ron Kiefner is director of transportation for Metamora High School.

But the couple was shocked when they learned from St. Mary's Credit Union in Metamora that there was a problem.

"Our credit record showed we had declared bankruptcy and defaulted on a number of loans," Mary Kiefner said. "We had never filed bankruptcy or defaulted on a loan in our lives. We looked so shocked that the woman at the credit union knew there was a mistake."

Sure enough, another person's credit history was embedded in the Kiefners' report.

"This guy was all over our credit history," Mary Kiefner recalled. "He had the same first name as my husband and his last name was very close to ours. And his Social Security number was only two digits off of mine."

The credit union gave the couple a form to correct their credit history. Eight weeks later, they got the truck loan. Kiefner believes that at some point her husband got a bill with his last name misspelled that was never corrected.

"That incorrect information got to the credit bureaus and automatically pulled this guy's name into our credit report," Kiefner said.

What complicates the matter is that several credit bureaus have the incorrect information. The Kiefners have had their credit histories corrected with two major credit bureaus and plan to do the same with a third.

"I would tell everyone to check their credit history once a year to be sure there are no mistakes in it," Mary Kiefner said. "If you don't, you may be in for a shock one day."

That's sound advice, according to Terrence J. Flynn Sr., executive director of Consumer Credit Counseling Service of Central Illinois. This not-for-profit agency in Peoria provides professional consumer credit education, confidential counseling and debt management programs for people in a 15-county area regardless of their ability to pay.

"Your credit history is your financial identity," Flynn said. "For the most part, it's your history of paying debts and bills. It's a summary of your financial reliability. Building and maintaining your credit history can help you get the loans you need.

"And the lender is more apt to lend you the money at a preferable interest rate. Somebody with a lesser credit score might have to deal in the secondary money market with higher interest rates, if they can get a loan."

A good credit history may be a factor in determining which apartments you can rent or which car you can buy. For-profit companies, known as credit bureaus, compile credit reports. There are three major credit bureaus:

Equifax: (800) 685-1111; P.O. Box 740241, Atlanta, Ga. 300374; www.equifax.com.

Experian: (888) 397-3742; P.O. Box 2002, Allen, Texas, 75013; www.experian.com.

Trans Union: (800) 888-4213; P.O. Box 2000, Chester, Pa., 19022; www.transunion.com.

In addition to your credit history, there is a credit score that gives lenders a way of determining how creditworthy you are. Everyone with a credit record has a credit score.

While there are different scoring models, a credit score typically is most influenced by how much debt you owe and if you pay your bills on time, according to a Federal Deposit Insurance Corporation publication, FDIC Consumer News.

The most commonly used credit scores are called FICO scores and are based on formulas developed by a company called Fair, Isaac & Co. FICO scores typically range from 300 to 850, with the higher scores generally indicating the best credit risks. A good score is 720 or higher. A score below 620 may cause lenders to reject a loan application or to charge you higher interest rates, according to information from the Web site www.unionplus.org.

Late payments on loans, a past bankruptcy or a court judgment ordering you to pay money as a result of a lawsuit will negatively affect your credit score. A significant amount of debt may also drop your score. If what you owe each month on all your loans and credit cards exceeds one-third of your monthly income, you may receive a lower score, according to FDIC Consumer News.

Other factors that can affect your credit score include how long you've used credit, how often you've applied for new credit and whether you've taken on new debt. Anyone who has been denied a new account at a financial institution because of a poor credit score is entitled to a free copy of their credit report. Otherwise, there is a nominal fee of $8 or $9.

Negative financial information that is correct remains in the report for seven years. Bankruptcy information, however, may be reported for 10 years. Positive information, however, can stay indefinitely.

One of the best ways to improve your credit score is obviously to pay your bills on time. Prompt payments of all your bills will maintain a high score or help improve a lower one. Reducing outstanding debt is another way of improving your credit score.

"Reducing the number of credit cards may improve your credit score," said Morgan Gee, education program instructor for CCCS of Central Illinois.

"If you have a credit card that you are not using, cancel it. I had a girlfriend in college who kept applying for credit cards in order to take advantage of store promotions (such as receiving a discount on a first purchase, or having no payments for six months).

"She always maintained a zero balance on her credit cards. But when she went to apply for a home mortgage, the lender said no. Those credit cards represented money she could borrow. That was seen as a negative. The lender advised her to eliminate the cards she wasn't using."

Charging your credit cards up to their limit can affect your score negatively. Having high balances makes you a bigger risk to lenders.

Lack of education and self-discipline are the biggest factors in consumers getting into financial trouble, Gee said.

"Setting up a budget, managing a checking account and how to use credit cards responsibly are things not typically taught in school," said Gee, who teaches classes in the responsible use of money for CCCS of Central Illinois.

"If you aren't learning this from your parents, you probably are not getting it at all. A lot of people in my education classes have not been brought up to distinguish between their needs and their wants."