Credit Center
What Is A Credit Bureau?
A credit bureau or credit reporting agency is in the business of gathering, maintaining, and selling information about consumers' credit histories. It collects information about consumers' payment habits from credit grantors like banks, savings and loans, credit unions, finance companies, and retailers. The credit bureau stores this information in a computer database and sells it to credit grantors in the form of credit reports. When you apply for a new credit card or loan, the credit grantor orders your credit report from at least one credit bureau and analyzes the information to decide whether to grant you credit. The credit bureau charges the credit grantor a fee for every credit report sold.
Although credit reporting agencies provide your credit report to lenders when you apply for credit, they do not make actual lending decisions. It is up to the lender to evaluate your credit report and any other factors they consider important and then decide whether or not to offer you credit.
The Three Consumer Credit Bureaus
There are three major credit bureaus that provide nationwide coverage of consumer credit information in the United States: Equifax, Experian, and Trans Union. Although many national lending institutions report consumer credit information to all three, smaller banks and other credit grantors may report to only one-or even none. That's why your credit report from one credit bureau is not necessarily exactly the same as your credit report from another.
What Exactly Is A Credit Report?
A consumer credit report is a document that contains a factual record of an individual's credit payment history. Credit grantors are permitted by law to review your credit report to objectively determine whether to grant you credit. There are 190 million credit active people in the United States who have a charge account, car loan, student loan, or home mortgage. As those people pay their bills, most lenders report credit payment information to credit bureaus. So most of the information in your consumer credit report comes directly from the companies you do business with.
What Information Does A Credit Report Contain?
A consumer credit report contains four types of information: identifying information, credit information, public record information, and inquiries. Identifying information includes:
· Your name.
· Your current and previous addresses.
· Your Social Security number.
· Your year of birth.
· Your current and previous employers.
· If you're married, your spouse's name.
Credit information includes credit accounts or loans you have with:
Banks.
Retailers.
Credit card issuers.
Other lenders.
Most information, whether positive or negative, remains on your credit report for 7 years from the date it is first reported, and then cycles off automatically. If there is inaccurate information in your credit report, you have the right to dispute it and have it removed.
Public record information includes any information that's contained in state and county court records, like:
- Bankruptcies.
- Tax liens.
- Monetary judgments.
Bankruptcies can remain on your credit report for up to 10 years.
Other public record information can remain for up to 7 years.
Inquiries indicate to other credit grantors that you have applied for new credit that could result in additional debt. Potential lenders view multiple recent inquiries on your credit report as a sign that you are overextending yourself. Most inquiries stay on your credit report for up to two years. (A credit risk score may also be included when your report is provided to a credit grantor, although it is not included on consumer review reports. The ways to calculate and use a credit score vary widely, so a score has little meaning outside of the context of a particular lender's unique guidelines for use. Therefore, it is not included on consumer review reports.)
What Is A Credit Risk Score?
A credit risk score is an assessment of an individual's credit worthiness based on a statistical analysis of the information contained in his or her credit report. The most well known type of credit risk score is the Fair, Isaac or FICO score. Sophisticated mathematical processes calculate the summary by assigning numerical values to various pieces of information in the credit report. Credit bureaus provide risk scores to credit grantors who use them to objectively evaluate an applicant's credit-worthiness. The score itself is relative and will be viewed differently by creditors depending on numerous factors, including the creditor's risk level, marketing goals, and business practices. Your risk score will change over time as your credit history develops.
Does A Credit Report Contain Other, Unrelated Personal Information?
No. Your consumer credit report does not contain information about your race, religious preference, medical history, personal lifestyle, personal background, political preference or criminal record.
What Is A Mortgage Report?
A mortgage report is a special credit report that lenders use prior to deciding whether or not to give you a home loan. Each report is compiled from credit reports from two or three credit bureaus. The mortgage credit reporting company purchases credit reports from the credit bureaus, combines them, and manually verifies specific information such as employment, credit account balances and public record information.
An employment report is a modified credit report that helps potential and current employers make hiring and promoting decisions. The employment report contains much of the same information about your loans and credit cards that your credit report has listed. However, your marital status, year of birth, and account numbers are omitted from the employment report.
Who May Check My Credit Report?
Federal Law carefully regulates how credit reports can be used and by whom. Individuals have the right to obtain their own reports, and businesses must meet the following requirements before they can access credit information:
· A background Proof of a permissible purpose under federal law
· Check and on-site inspection of the business
· A current business license
· A signed contract requiring the business to use the data properly
Re-establishing Credit
1. Know what's on your credit report and resolve any discrepancies.
a. Contact one of the major credit bureaus below to obtain a copy of your credit report:
Trans Union
1.800.888.4213
Equifax
1.800.685.1111
Experian
1.800.311.4769
b. If you've recently been denied credit, the Fair Credit Reporting Act requires that you be notified of the name and telephone number of the credit reporting agency providing the information. Contact the agency to obtain your credit report and determine if there are any inaccuracies. If there are mistakes, the back of the credit report will provide information on how to address your dispute.
2. Develop an action plan to pay your bills and execute it. Contact your creditors to review your payment options and catch up with late payments. This will show that you are interested in improving your payment history. Also, focus on ways to reduce your spending.
3. Look for ways to consolidate your bills. You may be able to pay off high interest credit cards and save money.
4. Try not to use credit again until you have improved your late payment situation. Consider secured credit cards and demonstrate your ability to pay them on time. Negative information "falls off" a credit report over time and you'll be able to improve your financing power.
5. Talk to a loan officer about your options. Simply click on apply now, submit your information, and one of our loan consultants will contact you within 24 hours.
Your FICO © Score
What Factors Determine Your FICOScore
When applying for credit, everyone wants to be thought of as a good credit risk. But what is a good risk? Most lenders use FICOŽ credit risk scores to obtain a fast, objective measure of your credit risk. By understanding the factors that can help or hurt your score, you'll have a better understanding of how lenders see you and how you can improve your credit standing.
The Five Factors That Determine Your FICO Score Are:
1. Payment history (approximately 35% of your score)
The factor that has the biggest impact on your score is whether you have paid past credit accounts on time. However, an overall good credit picture can outweigh a few late payments, and late payments will continue to have less impact over time.
2. Amounts Owed (approximately 30%)
Having credit accounts and owing money doesn't mean you are a high-risk borrower. But owing a lot of money on numerous accounts can suggest that you are overextended and more likely to make some payments late or not at all. Part of the science of scoring is determining how much debt is too much for a given credit profile.
3. Length Of Credit History (approximately 15%)
In general, a longer credit history will increase your FICO score. Lenders want to see that you can responsibly manage your available credit over time. However, even people who have not been using credit very long may get high scores, depending on how the rest of their credit report looks.
4. New Credit (approximately 10%)
People today tend to have more credit and to shop for credit more frequently. But opening several credit accounts in a short period of time can represent greater risk-especially for people with short credit histories. Requests for new credit can also represent greater risk. However, FICO scores are able to distinguish between a search for many new credit accounts and rate shopping. FICO scores generally do not associate shopping for the best rate on a loan with higher risk.
5. Types Of Credit In Use (approximately 10%)
Your FICO score will reflect your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. While a healthy mix will improve your score, it is not necessary to have one of each, and it is not a good idea to open credit accounts you don't intend to use. The credit mix usually won't be a key factor in determining your score-but it will be more important if your credit report doesn't have much other information on which to base a score.
Interpreting Your Score
When you or a lender receives your FICO score, up to four "score reasons" accompany the score. This helps to explain the top reasons why your score was not higher. These reasons are more useful than the score itself in helping you determine how you might improve your score over time, and whether your credit report might contain errors. However, if you already have a high score (for example, in the mid-700s or higher) some of the reasons may not be very helpful, as they may reference the factors that have the least impact on your score, such as: length of credit history, new credit and types of credit in use.
Here are the top 10 most frequently given score reasons.
Note that the specific wording given by your lender may be different from the reasons shown in this list.
- Serious delinquency.
- Serious delinquency, and public record or collection filed.
- Derogatory public record or collection filed.
- Time since delinquency is too recent or unknown.
- Level of delinquency on accounts.
- Number of accounts with delinquency.
- Amount owed on accounts.
- Proportion of balances to credit limits on revolving accounts is too high.
- Length of time accounts have been established.
- Too many accounts with balances.
Improving Your FICO
Ten Ways To Improve Your FICO Score
When you apply for credit, your credit score helps lenders decide how likely it is that they will get paid back on time. The most widely used credit bureau scores are developed by Fair, Isaac and Company. These are known as FICOŽ scores. With a higher score you'll be able to qualify for better interest rates, higher credit limits, and more types of credit than you would with a low score. (See Your Credit Risk Score for more information.) There are no tricks or quick fixes to getting a good credit score, but you can raise your score over time by demonstrating that you consistently manage your credit responsibly. Here are 10 tips that can help you raise your score:
1. Pay your bills on time.
Proving that you can pay your bills on time is the best thing you can do to improve your score. And it's never too late to start. Even if you've had serious delinquencies in the past, these will count less over time.
2. Keep credit cards balances low.
High outstanding debt can pull down your score.
3. Check your credit report for accuracy.
There may be inaccurate information on your credit report that can be easily cleared up. Always contact the original creditor and all three credit bureaus whenever you clear up an error, so that the inaccurate information won't reappear later. Requesting a copy of your credit report won't affect your score if you order it directly from the credit reporting agency or an authorized organization.
4. Pay off debt rather than moving it around.
Consolidating your credit card debt on one card or spreading it over multiple cards will not improve your score in the long run. The most effective way to improve your score is by simply paying down the amount you owe.
5. Have credit cards - but manage them responsibly.
In general, having credit cards and installment loans which you pay on time will raise your score. Someone who has no credit cards tends to have a lower score than someone who has managed credit cards responsibly.
6. Don't open multiple accounts too quickly especially if you have a short credit history.
This can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts, something that your FICO score also considers.
7. Don't close an account to remove it from your record.
A closed account will still show up on your credit report, and may be considered by the score. In fact, closing accounts can sometimes hurt your score unless you also pay down your debt at the same time.
8. Shop for a loan within a focused period of time.
FICO scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occur.
9. Don't open new credit card accounts you don't need.
This approach could backfire and actually lower your score.
10. Contact your creditors or see a legitimate credit counselor if you're having financial difficulties.
This won't improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better. |
