credit history & scores. credit reports aka: credit history 3 credit bureaus receive and...

CREDIT HISTORY & SCORES

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CREDIT REPORTS aka: credit history 3 Credit Bureaus receive and maintain

information on consumers: Experian, TransUnion, and Equifax

This information helps lenders and others to make decisions about consumers.

You are entitled to one free report each year from each credit Bureau (www.annualcreditreport.com)

Credit scores are derived from your credit history

Reports contain 4 categories of information

Identification and Employment

Payment History

aka: Tradelines

Inquiries

Public Records

Identification and Employment

Name, address, and telephone numbers

Social security number

Spouse’s name

Aliases

Employment history, income

Prior addresses

Home ownership

Payment History

The Tradelines Accounts (installment, revolving,

secured) Individual or joint Credit limits Current status How you have repaid Overdue information (30, 60, 90)

Inquiries

Credit reporting agencies record an inquire whenever your credit report is shown to another party, such as a lender, service provider, landlord, or insurer. Inquiries remain on your credit report for up to two years.

Soft Inquiry: promotional, monitoring, etc.

Hard Inquiry: From your credit grantors or potential lenders

How an Inquiry will impact your score: When the information on your credit report

indicates that you have been applying for multiple new credit lines in a short period of time (as opposed to rate shopping for a single loan, which is handled differently), your score can be lower as a result.

Statistically, people with six or more inquiries can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports

Public Information Most public record information stays on your

credit report for 7 years.

Bankruptcies Liens and judgments Foreclosures Garnishments Late Child Support Payments

Sample Credit Report

www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf

What is not in your credit report?

A credit report does not include information about your checking or savings accounts, bankruptcies that are more than 10 years old, charged-off or debts placed for collection that are more than seven years old, gender, ethnicity, religion, political affiliation, medical history, or criminal records.

Your credit score is generated by information on your credit report, but is not part of the report itself.

Who can look at your credit report?

Anyone with what is considered a permissible purpose can look at your report. Including:

Potential and current lenders, landlords, & insurance companies

Employers and potential employers (with your written consent) Companies you allow to monitor your account for signs of

identity theft A state or local child support enforcement agency Any government agency Someone who uses your credit report to provide a product or

service you have requested Someone that has your written authorization to obtain your

credit report

Fixing Errors on Your Report

1. Contact the Credit Reporting Agency

2. Contact the Creditor

3. Contact the other Credit Reporting Companies

4. Ensure the error is fixed within 30-45 days

5. If you cannot resolve the disputed information, add a brief statement to your file explaining the circumstances

Additional Information about Credit Reports

Negative Information stays on your report for 7 years, bankruptcies will show up for 10 years

You are entitled to one free credit report each year; go to: www.annualcreditreport.com. You can also obtain a free copy if you are denied credit

The Fair Credit Reporting Act (1971; amended in 1997 & 2003) is the federal law enables consumers to learn what information consumer reporting agencies have on file about them, and to dispute errors

CREDIT SCORES

A credit score is a rating used by a lender to help determine whether you qualify for a particular credit card, loan, or service. Based on information in your credit file, the credit reporting company analyzes your information using a complex mathematical model to yield your credit score.

Why your score matters

Credit scores are used by lenders to estimate if you'll pay off your loans and whether you'll pay on time. Because it's one of the most influential factors in deciding whether to grant you credit, knowing your score can is important when you apply for a loan. It is used to determine the rates and terms of your loans.

Why is credit scoring used?

• It is fast

• Scores are based on data and statistics

• They are unbiased and nonjudgmental

• It is a reliable tool to indicate risk

Who calculates the score?

Credit bureau scores are often called “FICO scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the major credit reporting agencies.

Names for FICO Scores

Credit Reporting Agency

FICO® Score

Equifax BEACON®

Experian Experian/Fair Isaac Risk Model

TansUnion EMPIRICA®

Your score ranges from 300 to 850, but the majority of scores fall within the 600s and 700s. Higher scores indicate a lower credit risk. For a score to be calculated, your credit report

must contain at least one account that has been open for six months or more, and at least one account that has been

updated in the past six months.

What Factors Impact Your Score

• Payment History

• Public Records

• Amounts owed

• Length of credit history

• New accounts

• Inquiries

• Types of accounts in use

The breakdown

How your score impacts your APR

How to improve your score

• Keep account balances low

• Pay bills on time• Don’t open credit

cards/accounts you don’t need

• Have credit cards, but manage them responsibly

• Closing an account doesn’t make it go away

Grow Your Credit

What is not in your score?

• Gender• Marital status• Religion• Ethnicity• Nationality• Bank Records

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