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Information for Better Decisions
Protecting Your Financial Resources
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Credit Reports
Recently, Congress passed a new law called the
Fair and Accurate Credit Transactions Act (FACTA). This new law
requires each of the top 3 credit reporting agencies to provide
1 free credit report annually to all consumers. This new law came
about as a result of the proliferation of Identity
Theft.
When you may order your free report depends on where you live. The
phase in schedule is as follows:
December 1, 2004: Alaska, Arizona, California,
Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon,
Utah, Washington, and Wyoming.
March 1, 2005: Illinois, Indiana, Iowa, Kansas, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota,
and Wisconsin.
June 1, 2005: Alabama, Arkansas, Florida, Georgia, Kentucky,
Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and
Texas.
September 1, 2005: Connecticut, Delaware, District of Columbia,
Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New
York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia,
and West Virginia, Puerto Rico, and all U.S. territories.
To receive your free report:
- Visit the Free Annual Credit Report website at https://www.annualcreditreport.com
(must type in the URL or copy and paste), or
- Call (877) 322-8228, or
- Mail a completed Annual
Credit Report Request Form (scroll to the bottom of
the .pdf file) to Annual Credit Report Request Service, P.O.
Box 105281, Atlanta, GA 30348-5281.
To learn more about the Fair and Accurate Credit Transactions Act,
click
here. You may also visit the National
Association of Federal Credit Union's Website.
Knowing Your Credit Report
Knowing what's on your credit report is very important, particularly
if you're about to buy a house or apply for a loan. You need to
know what information is on your report so you can correct any mistakes.
You can also help protect yourself from identity
theft by watching your credit reports for accounts you did
not open or a large number of Inquiries.
Establishing and maintaining good credit is an important part
of long-term financial planning. Most individuals do not have
enough cash to cover emergency expenses or to make major purchases
such as a home, car, or college education. As a result, accessing
credit has become an important part of our lives. Most creditors
rely heavily on the information in your credit reports for granting
loans. Knowing what is on your credit reports and how to build
and repair
your credit is an important step to taking control of
your finances.
The Internet is rife with information concerning your credit report
and how to get a free copy. Unfortunately, most of these sites
have gimmicks that require your credit card information for a
"free" trial subscription to one of their products.
It's normally less expensive to contact each bureau directly and
ask for a copy of your report.
Did You Know...
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Credit reports can contain
errors that can ruin your credit? Errors can be fixed if you
know about them.
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You could be a victim of identity
theft? This crime can go undetected for years. By checking
your credit report you can help protect yourself.
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Your credit report is often
the first and only impression that you make?
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Today's technology has made
it easier to commit credit fraud? Examining your credit report
can stop credit fraud before it causes lasting damage.
It's a good idea to order a copy
of your report from EACH of the three major credit
bureaus each year. The average fee is $10. You should include the
following information in your request:
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Your full name. State any aliases
or maiden name, your middle initial, and generational indicators:
Jr., Sr., II, or III.
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Current address and former addresses
for the last 5 years. If you have moved in the last 6 months,
provide proof of your current address from a utility bill or
phone bill. The credit bureau may not have your current address
on file yet.
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Social security number. This
must be included to process your request.
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Spouse's name if applicable.
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State whether you have been
denied credit within 60 days (include a copy of the credit denial
or related details).
Contact information:
EQUIFAX
Credit Info. Services
P.O. Box 740256
Atlanta, GA 30374-0256
Phone: (800) 685-1111
www.equifax.com
TRANSUNION CORP.
National Disclosure Center
P.O. Box 1000
Chester, PA 19022
Phone: (800) 888-4213
www.transunion.com
EXPERIAN (formerly TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
Phone: (888) 397-3742
www.experian.com
Each of these sites provides you
with in-depth information concerning all aspects of your credit.
How to read your credit report
It is important that you know how to read your credit report and
understand the special coding. Check the details; make sure your
name is spelled correctly, and that your date of birth and social
security number are correct. If these items are incorrect, someone
else's credit history may be mistakenly included in your file.
You should find all of your creditors listed on your credit report.
The first thing to do is to find and circle any negative remarks.
You will find a key to the coding symbols on the report. The law
requires credit bureaus to explain anything on the report that
you cannot understand, so contact them if you have any questions.
Next, look for any damaging remarks in the Historical Status section
of your report.
Identify the negative marks on your credit report.
The most damaging remarks are "past dues". A "past
due" is noted whenever your payment wasn't received within
30 days of the due date. Your payment must actually be credited
to your account by the due date, not merely mailed by that date,
to avoid a late payment mark. Most "past due" notations
are correct. However, there are times when entries are made accidentally,
or the mail delivered your payment late, or there was a delay
in processing your payment.
The "comments section" may, for instance, contain remarks such
as "COLL ACCT". "COLL ACCT" means "collections
agency account." This indicates the creditor has turned the
account over to a collections agency because it was seriously past
due. Other negative entries may include:
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CURR WAS FOR. Foreclosure proceedings began
on the account. However, all past due amounts have been paid
and the account is now current.
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CURR WAS 30-2. Account has been 30 days past
due twice, but is now current.
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DEED IN LIEU. Borrower gave a creditor a
deed to their property to prevent them from foreclosing.
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DEL WAS 120. At one point, account was 120
days past due. Some payments have been made, but the account
is still 30, 60, or 90 days late.
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GOVCLAIM. Borrower failed to repay a government
loan, and the government filed a claim against the borrower.
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FORECLOSURE. A foreclosure occurred on borrower's
property as borrower failed to pay the creditor.
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NOT PAY AA. An outstanding balance still
exists and borrower is not paying according to the agreement.
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CHARGED TO P & L. The creditor charged-off
the debt on their profit and loss statement. They felt it was
uncollectible.
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REPO. Property was repossessed because borrower
failed to repay loan.
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VOL SURR. To prevent repossession by a creditor,
borrower voluntarily surrendered their property.
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30-DAY DEL. Payments are at least 30 days
late on one or more accounts.
Negative remarks from public record data should
also be examined closely for accuracy. These include:
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Bankruptcy - bankruptcy indicates borrower
once was financially unable to pay obligations when due.
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Tax Lien - borrower owes taxes and an IRS
or state tax lien was entered against borrower's property.
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Judgment - there is now a judgment on record
against borrower due to losing a lawsuit either at trial or
because of failure to defend.
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Settled - a pending lawsuit was resolved
before trial.
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Child Support - failure to pay court-ordered
child support.
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Withdrawn - a bankruptcy case was withdrawn.
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Dismissed - either the court ruled in borrower's
favor or the creditor failed to show up and your the was dismissed.
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Discharged - bankruptcy was filed and the
court relieved borrower of debts.
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Paid and Satisfied - a court judgment or
a collections account has been fully paid.
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Suit - there is a legal action pending against
borrower.
Clearly, each of these marks indicates a bad credit risk.
Every time you apply for credit, an "Inquiry" will be
listed on your report. Too many credit Inquiries within a short
period of time may be interpreted negatively. Quite often, those
having financial problems seek additional credit to solve them.
Creditors will deny you credit when there are too many Inquiries
on your report. Each creditor determines how many Inquiries are
"too many". To offset the problem, you can have a 100-word
(or less) statement added to your credit report to explain in
a positive way why you have so many credit Inquiries.
Creditors look for patterns of behavior regarding credit usage.
For example, holding or applying for several credit cards may
be detrimental to future credit applications, even if your existing
credit cards have zero balances. In addition, your "debt
ratio" (the percentage of your monthly income that is spent
in debt payments), may be too high.
Your credit report will also include an "Account Profile"
column. This column contains a summary rating for each account.
A summary may read "positive," "negative"
or "non-rated":
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"Positive" means you pay on time.
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"Negative" means serious credit
problems, perhaps a defaulted debt.
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"Nonrated" may signify a few late
payments, which still gives you a weak credit report even when
there is no strongly negative entry.
Each negative or non-rated entry has a code that reflects the
nature of the problem. Your goal is to protest and eventually
remove every negative or non-rated profile.
Sample Equifax report.
Sample Experian report.
Sample TransUnion report and score.
Credit Scores
In addition to your credit REPORT,
most creditors will look at your credit SCORE. While there
are many kinds of credit scores, the most commonly used are credit
bureau risk scores developed by Fair,
Isaac & Company. These are commonly known as FICO
scores, although they have different names at each of the national
credit reporting agencies such as risk score, score card, or scoring
model.
A credit score is a snapshot of your credit history. A low score
can mean you won't get a credit card or loan. Also, some lenders
use your credit score and other information to set the "price"
(interest rate) for your loan. A lower score will result in a
higher interest rate.
A credit score tells a lender how likely an individual is to repay
a loan or make credit payments on time. When a lender requests
a credit report and score from a credit reporting agency, the
score is calculated by a "scorecard" or scoring model
- a mathematical equation that evaluates many types of information
from your credit report at that agency. By comparing this information
to the patterns of thousands of other credit reports, scoring
identifies your level of credit risk.
Factors Affecting Your Credit Score
Fair, Isaac & Company considers
the following factors in determining your credit score:
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Payment history. Your score is negatively
affected if you have paid bills late, had an account sent to
collection or declared bankruptcy. The more recent the problem,
the lower your score -- a 30-day late payment today hurts more
than a bankruptcy five years ago.
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Outstanding debt. If the amount you owe is
close to your credit limit, that is likely to have a negative
effect on your score. A low balance on two cards is better than
a high balance on one.
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Length of your credit history. The longer
your accounts have been open the better.
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Recent Inquiries on your report. If you have
recently applied for many new accounts, that may negatively
affect your score. Promotional Inquiries don't count.
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Types of credit in use. Loans from finance
companies generally lower your credit score.
This is only a guide as to what credit scoring
companies deem important. Keep in mind that some companies may consider
different factors. Among the items that credit scoring companies
cannot consider are age, race, gender, education, national
origin, marital status and receipt of public assistance.
What the Numbers Mean
Credit scores range from 400 to 900, with an average of approximately
700. According to the model, as your score increases, your
risk of default decreases. You may have difficulty convincing
a creditor to make you an affordable loan (or any loan at all)
if your score is far below average.
Just as your credit history can vary from credit bureau to credit
bureau, so can your credit scores. It is possible to have a high
score with one credit bureau (Equifax, Experian, or TransUnion)
and a low credit score with another, just as you might have a
clean credit history with one bureau and a muddied record with
another. Wide-ranging credit scores however, are rare.
Improving Your Credit Rating and Score
If you want to improve your credit rating and score, take the following
steps:
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Pay your bills on time.
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Update old accounts with each credit bureau
(accounts reporting a balance may have been paid down to zero).
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Don't max out your credit cards. Keep your
balances below 30% of your credit limit, perhaps by carrying
small balances on several cards rather than high balances on
one or two.
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Limit the number of times you apply for credit.
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Maintain your accounts for a long period
of time.
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Stay away from finance companies.
Don't give up hope if you have a low score. If
you think the problem is caused by mistakes on your credit report,
you should get a copy of your credit report, fix the problem, and
explain the situation to the lender. Most lenders will override
credit scores if they think you are a good risk despite problems
with your score.
Sample Equifax score.
Sample
Experian score.
Sample
TransUnion report and score.
For additional information on credit reports
and credit repair, visit All
About Credit Reports.com.
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