What Is A Credit Score?
A credit score is
a number that reflects your risk level, as an individual, to a lender. The
higher the number, the lower the risk will be to the lender. As you
apply for increased credit or attempt to make a purchase, the lender will
check your ability to pay back that loan. The more negative marks
you have on your credit report, the less likely you will be granted the
loan you requested.
How
Often Can Individual Credit Scores Change?
Credit scores
are not fixed; instead, they reflect a consumer’s current credit
situation, based on the information in the credit report at the time the
report is pulled.
What Is A Credit Report And What Is It Used For?
A credit report is
a summary of your use of credit and other personal information which gives
lenders a snapshot of your credit history. Whether you are
applying for a credit card, a car loan, a personal loan or a mortgage,
lenders want to determine your credit risk level. In short, lenders
want to know if they can rely on you to pay them back on time.
There are three
major credit reporting agencies: Experian, TransUnion and Equifax. These
agencies collect data and maintain records on millions of Americans and
their bill payment histories. The reports tell lenders how much
credit you've used, what types of credit you've used, how long you've had
various accounts, and whether you pay your bills on time. Every
year, millions of lending decisions are based upon the information in
those reports.
Your credit report and score strongly influence how much credit will
be available to you and the terms you are offered by lenders. The
speed you are approved for credit, the interest rates you get and
decisions about the amount of credit are all determined by the information
found in your credit report.
What’s In Your Credit Report?
Although each credit
reporting agency formats and reports this information differently, all
credit reports contain basically the same categories of information:
Identifying Information. Your name, address, Social Security number, date of
birth and
employment information are used to identify you. These factors are not
used in credit scoring.
Updates to this information come from
information you supply to lenders.
Trade Lines. These are your credit accounts. Lenders report on each account you
have
established with them. They report the type of account (bank
card, auto loan, mortgage, etc.), the
date you opened the account,
your credit limit or loan amount, the account balance and your
payment history.
Credit Inquiries. When you apply for a loan, you authorize your lender to ask for a copy
of your
credit report. This is how inquiries appear on your credit
report. The inquiries section contains a list
of everyone who accessed
your credit report within the last two years. The report you see lists
both
"voluntary" inquiries, initiated by your own requests for credit,
and "involuntary" inquiries, such as
when your current
creditors
view your report so
as to alert them of new issues which might affect your
ability to pay.
Public Record and Collection Items. Credit reporting agencies also collect public
record
information from
state and county courts, and information on overdue debt from
collection agencies.
Public record information includes bankruptcies,
foreclosures, lawsuits, wage attachments, liens and
judgments.
How
Is My Credit Score Calculated?
The formula used to
calculate your FICO score includes information based on several
factors:
35% on your payment history
30% on the amount you currently owe lenders
15% on the length of your credit history
10% on the number of new credit accounts you've opened or applied
for (fewer is better)
10% on the mix of credit accounts you have (mortgages, credit
cards, installment loans,
etc.)
Are
"Credit Bureaus" Government Agencies?
No. Credit reporting
companies are just that: companies. They are in business to make
money, and they generate their income by providing consumers' credit
data to
creditors via subscriptions.
How
Long Do Negative Items Stay On a Credit Report?
Negative credit
accounts, or trade lines, can remain on your credit report for up to 7
years, and bankruptcies for up to 10 years. Inquiries on your credit report may remain for 2 years. These are the
maximum times permitted by federal law; however, these times are not mandatory.
Why Do Credit Bureaus Have Separate Reports For Husband And Wife?
The credit bureaus
collect information based on individual Social Security numbers.
Do All Three Credit Bureaus Report The Same Information?
Depending on which
lender you go through, and the type of product, will determine which credit bureau the
account will
appear on. Also, it could be on one, two or all three bureaus.
Who Has "Permissible Purpose" To Access My Credit File?
According to the Fair Credit Reporting Act, a credit reporting company may
only disclose your credit report if someone is:
● Granting credit, reviewing
your account, or collecting on your account
● Reviewing you for employment purposes
●
Reviewing your application for insurance
●
Reviewing your eligibility for a license or government-related
benefits
●
Providing information for a business transaction, such as
renting an apartment
● Has a court order
●
Has an IRS subpoena
●
Someone to whom you have given written permission
How Do Mistakes Get On My Credit Report?
It is estimated that
as many as 80% of credit files have errors of some kind. Very often
the information is incomplete, not updated, or
corresponds to someone else. Typical examples are:
● You applied for credit under different names (for example,
Margaret Jones versus Margaret Jones-
Smith)
● Someone made a clerical error in reading or entering name or
address information from a hand-
written application
●
You gave an inaccurate Social Security number or the number was
misread by the lender
●
Loan or credit card information was inadvertently applied to the
wrong account
Who Can Remove Items From My Credit Report?
Only the credit
bureaus have the power to remove items from your credit report.
As required by law, the credit bureaus must delete inaccurate,
unverifiable, or outdated information.
Is Credit Repair Legal?
Absolutely. The Fair
Credit Reporting Act allows anyone to dispute inaccurate items on
their credit reports. There's nothing we do that you cannot do
yourself when it comes to fixing your credit situation. Individuals
can restore their credit on their own; truly, the process can
take time and requires some patience and knowledge when it comes to credit laws.
If you decide to use our services, we have the experience and knowledge to get you
positive results.
Is
There Anything That Cannot Be Removed From A Credit Report?
No. All information
reported by the credit bureaus is subject to the same laws and
criteria. We may challenge on your behalf any items you request and
the credit bureaus must investigate these items.
