Loan application turned down? Check your credit bureau record

For many people, the cheapest small loan they can find these days is the one they get by using a major credit card for cash or by charging purchases at the local store. Even at 18 percent interest, these loans are cheaper than many banks and finance companies charge. And some banks won't even bother writing loans for less than $1,000 or $1,500.

Opening a charge account, however, or getting a credit card application approved can sometimes lead to a surprising discovery. For mysterious reasons, your application for credit has been turned down. What happened?

After the application was filled out, the store or bank contacted a credit bureau in your area. The bureau is asked if there is anything on the record that would make you a poor credit risk. The credit bureau does not approve or disapprove your application, it just supplies information for the creditor, who must make his own decision.

In some cases, though, the information at the credit bureau is wrong or incomplete. Your name may be confused with someone else's; your address may not be up to date and the person now living in your former home is the one with credit problems, not you; or you may have been late with a few payments on a previous loan because of a family emergency.

After getting over the shock of rejection, finding and correcting errors on a credit record is fairly easy. While there are a number of local credit reporting agencies, the credit records of most people can be found in the files of at least one of four major firms.

Sometimes, several agencies have identical copies of your file. The largest credit bureau is TRW Credit Data Company. The others are Credit Bureaus Inc., Trans Union Credit Information Corporation, and the Chilton Corporation. These and other firms can be found under ''credit reporting agencies'' in the Yellow Pages. You can also ask the store or bank where you applied for credit what reporting firm it uses.

If you are asking the credit bureau for information because you were turned down for credit, it must be given to you free of charge. You must also be given an opportunity to make corrections or add a short explanation of why there is a problem (outlining the family emergency that caused those late payments, for instance).

Credit experts advise, however, that it is not a bad idea to check your credit record now and then, before you fill out that application. A ''curiosity'' check like this only costs $5 to $10, and it can save time and embarrassment.

The credit bureau record is not a credit rating, emphasizes Walter Fabezewski , assistant vice-president for personal loans at Manufacturers Hanover Trust Company. ''It's not like a credit rating that a state or corporation gets from Moody's or Standard & Poor's,'' he said. It is just information on a person's credit history, ''a credit profile,'' he adds.

If you have a good credit history, you can make sure it follows you when you move, says William Detlefsen, manager of member services at Associated Credit Bureaus, the industry's trade organization. Although most credit applications ask for previous addresses to help with research, having the records handy can speed things up. Most credit bureaus will send your file to the new town, if you request it in writing, Mr. Detlefsen said.

There is the possibility, of course, that damaging information on your credit report is accurate. If this is the case, remember that the report contains seven years of credit history -- up to 10 years if you have declared bankruptcy - and rebuilding a good record will take time. This is the time to set up realistic spending, paying, and savings habits. And as you make future payments, keep accurate records that these payments were made on time and in full.

Finally, if you do have some unforeseen crisis that prevents you from making loan payments for a few months, contact the creditors immediately. Most of them have seen cases like this before and they can help you work out a more gradual repayment schedule or even defer a few payments until things get straightened out. This way, you stay out of financial trouble and keep your credit record clean.