Archive for November 9, 2009
You can get all your free credit reports?
By Getachew Teklu
Due to the passage of the 2003 Fair and Accurate Credit Transaction Act (FACTA), all Americans are entitled to one free credit report from each of the three major credit reporting agencies — Equifax, Experian and TransUnion — upon request every 12 months. There are several ways you can request your free credit report:
•Online: Visit AnnualCreditReport.com
•Telephone: (877)-322-8228
•Mail: Complete the Annual Credit Report Request form and mail it to the following address:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
The 2003 law did not eliminate the other ways to receive a free credit report. You’re still entitled to a free credit report if you meet any of the following conditions:
•You applied for a loan and were turned down. You can request a free credit report by writing the correct credit bureau within 30 days of your rejection. Enclose a copy of the declined loan application with your request.
•You’re unemployed and planning to apply for jobs in the next 60 days.
•You’re receiving public assistance.
•You believe your credit file contains mistakes due to fraud.
•You currently reside in a state that offers an annual free credit report from each credit reporting agency by state law. Residents of the following seven states are entitled to one free copy of their credit report each 12 months from each of the three main credit agencies per federal law and one free copy of their credit report each 12 months from each of the three main credit agencies to satisfy their state’s law.
Colorado
Georgia
Maine
Maryland
Massachusetts
New Jersey
Vermont
The second free report can be obtained by directly calling each credit bureau:
Equifax: 1-800-685-1111
Experian: 1-888-397-3742
TransUnion: 1-800-916-8800
If you have any difficulty ordering this free report over the phone, you may also write to each bureau:
Equifax
P.O. Box 740256
Atlanta, GA 30374
Experian
P.O. Box 2002
Allen, TX 75013
TransUnion
P.O. Box 2000
Chester, PA 19022
Include the following info in your letter. Be sure that each person requesting the report signs and dates the request.
•Your full name
•Date of birth
•Current and former address
•Social Security number
•Your spouse’s name
•Your phone number
Sources: Bankrate.com and Privacy Rights Clearinghouse
For those who do not reside in the seven states where you are entitled to a second free credit report per agency per year, you may order a second or third report directly from the three agencies by mail. Include the same identifying information listed above and mail to the same addresses listed for each bureau. Here is a breakdown of the charges:
California residents: $8 per report
Connecticut residents: $5 per report
Minnesota residents: $3 per report
Montana residents: $8.50 per report
Virgin Island residents: $1 per report
Residents of all other states: $10 per report
Fixing Errors on a Credit Report
What if your name is Bob Jones, and when you get your credit report from one of the credit bureaus you find that there are accounts listed there that are held by another Bob Jones? Or, you find that your unemployed and debt-heavy brother’s information is showing up on your report? What do you do? Under the FCRA, you have the right to, and the CRA has the responsibility of, correcting any errors or incomplete information in your credit report.
Listed below are some steps you can take to correct errors on your report. Whatever you do, don’t use one of those companies that say they can “fix” your credit history — erase bankruptcies, liens, bad credit, etc. While there are some legitimate companies out there that can help you, you can do anything they can do.
One very important thing is to document everything you do (dates and times of phone calls, people you spoke with, what they said, what your action was, etc.), and keep copies of everything you send them. Don’t send original documents — send copies. Remember to be aggressive and persistent. This process may take a while — usually three to six months.
- Let the paperwork begin – You will begin a long and often arduous task of writing letters explaining the inaccuracies. First, send a letter to the CRA to give your side of the story and try to set straight the inaccuracies that have been reported. The letter should include your name and address and explain what is inaccurate and why. Tell them the facts and request a correction to your report. It would also help to include a copy of your report with the incorrect information circled, along with copies of any documentation that supports your claim. Send your letter by certified mail with a return receipt so you know it was received. Keep a record of everything you sent.Second, send a letter to the merchant or creditor who supplied the incorrect information to make it known that you are disputing it. Send copies of the documentation that supports your claim, just as you did with the CRA.
(NOTE: Most of the national credit bureaus allow you to begin the dispute process online. This isn’t a bad place to start; but if you have additional documentation, presenting it the good old fashioned way is probably best.)
- Give the CRA 30 days – The credit reporting agency legally has 30 days to investigate your claim (unless your claim is deemed “frivolous” or “irrelevant”). If after this amount of time you haven’t heard back, call the customer service department. There is usually a toll-free number on the credit report that you can call for assistance. Remember to keep notes of your conversations and any actions that were taken as a result.
- Re-reviewing your credit report – When you get a written response from the credit agency, you’ll also get a new copy of your credit report (if there were any changes). If any information is changed on the report, the CRA cannot change it back unless the creditor provides proof that it was accurate. In this case, you will get notification from the CRA that the item has been put back on your report. You’ll receive the contact information for the creditor or merchant so you can begin your battle (if you know you’re right). Like we said at the beginning, be aggressive and persistent. Find out the creditor’s side of the story. See below to find out what to do if they’re right and you’re wrong.
If you can’t get any satisfaction and feel you’re not being treated fairly by the creditor, you can contact the agency to which they report. Credit InfoCenter has a page that lists this contact information.
What if you’re wrong?So, what if you dispute something and then find out that they were right and you were wrong? One thing to try is to go back to the creditor and try to persuade them to take it off your report. Of course, this will depend on how bad the problem was or how often you were late with payments, but it is still worth a shot. The creditor can legally remove anything they have reported whenever they want to. If that doesn’t work, you can still add a statement (of limited length) to go along with your report, but that’s about all you can do (other than debt validation in the case of collections). If the negative information is accurate, it can haunt your credit report for seven years. These are the exceptions:
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How Lenders Interpret Your Credit Report
your credit report only relays the history of your dealings with creditors. However, you need to look closely. There’s information there that may seem innocent to you but not to potential creditors. This includes information like:
- Inquiries – Every time you apply for a credit card to get a free travel mug, duffel bag, or T-shirt, you are adding another hard inquiry to your credit report. When potential lenders see these inquiries, it may wrongly imply that you’re either in some financial situation where you need a lot of credit, or are planning to take on a large debt. Either can flag you as a high credit risk.Other types of inquiries, such as your own requests to view the report, employer requests to view the report and requests by marketers to get your name in order to sell you something, count as soft inquiries. These inquiries don’t show up on the reports that lenders see, and therefore don’t affect how they view your credit.
Also, watch out when you are car shopping or mortgage shopping. Make sure you don’t let the car dealer or mortgage broker run your credit unless you know you’re going to be buying from them. While the FCRA allows these types of multiple credit inquiries that are within seven to 14 days of each other to be counted as a single inquiry, you would have to be careful of your timing to make sure you don’t have multiple inquiries show up.
So, how many hard inquiries can you have without a problem? Some experts say that if you have 10 credit card inquiries in six months, that will probably scare a lender. Others experts say that as few as six credit card inquiries in six months can label you as risky. Inquiries that are older than six months may not be looked at as strongly because if you actually set up the loan or opened the credit card account, those accounts would now be showing up on your report as well. The newer inquiries might lead the lender to think that you actually have the credit accounts available now but they haven’t shown up on the credit report yet. Most inquiries drop off of your report after two years.
Open credit accounts – Another thing to watch out for as you gather all of those free mugs and duffel bags is that even though you may have forgotten about them, accounts you don’t use still count toward your total available credit. Just as with the hard inquiries we’ve talked about, these can indicate to a potential lender that you could easily put yourself into financial danger with all of that readily available credit.
- According to TransUnion and Experian, you should not close out your oldest card, because it has the most history on it; also, you should maintain four to six credit cards to “keep your credit score and debt balances healthy” . But other than that, close the accounts you don’t use. In addition to avoiding excessive available credit, you’re limiting your exposure to identity theft.
Cutting up the card or just not using it doesn’t mean the account is closed. You have to call or write to the card company and ask to close the account.
- Missed payments – Obviously, your payment history makes a big difference. You should always make at least the minimum payment, or consolidate accounts to reduce your payments. These delinquencies stay on your report for seven years — even if you’ve caught up your payments! The same goes for accounts that creditors have turned over to collection agencies or charged-off — meaning that they’ve written the account off as a loss. Even if you do pay off the account at a later date, the charge-off or collection action stays on your report for seven years.
- Maxed-out credit lines – Another thing that scares lenders is a maxed-out credit line (or two). This waves a big red flag and indicates that you may be financially strapped for some reason. Some experts suggest moving debt around if this is the case. For example, if you have a maxed-out card but have other cards that haven’t reached their credit limits, you might consider moving some of the debt from the maxed-out card to the non-maxed-out ones.
- Debt in relation to income – If you have unsecured credit card debt that is more than 20 percent of your annual income, lenders may not want to give you the best deal on a loan — if they’ll take the chance and give you a loan in the first place. Work to reduce the debt-to-income ratio and you’ll be able to get better rates on the loans you seek.
How Credit Bureaus Get Information
A credit bureau is a clearinghouse for credit information about consumers. There are more than 1,000 local and regional credit bureaus around the country that gather information about your credit habits directly from your creditors. Typically, these smaller local and regional bureaus are affiliated with one of three large national credit bureaus — Equifax, Experian and TransUnion (see below).
For example, let’s say you apply for a credit card and provide the card company with all of your personal information, such as your name and address, your previous address (if you haven’t lived at your current residence for more than two years), your employer, other credit cards you have, etc. The credit card company then contacts a credit reporting agency (CRA) and reviews your credit report. If the company approves your application for a credit card, then the information you’ve supplied is forwarded to the CRA. That credit card company also reports your payment history to the CRA, so that becomes part of the report. The CRAs also access information about you from public record information such as court records.
All of the transactions you have that involve credit are reported monthly to CRAs by the merchants or creditors you deal with. Most large creditors report this information to all three national credit bureaus (CRAs). Some smaller lenders or merchants, however, may only report the information to one. For this reason, your report from each CRA may not be the same. You might get a copy of your report from Experian that does not include an account that shows up on your report that is maintained by TransUnion. For this reason, it is wise to review copies of all three reports.
You can find the contact information for all three national credit bureaus in the United States.
- Equifax – www.equifax.comTo order your report, call: 800-685-1111 or write: P.O. Box 740241, Atlanta, GA 30374-0241To report fraud, call: 800-525-6285/ TDD: 800-255-0056 and write: P.O. Box 740241, Atlanta, GA 30374-0241
- Experian – www.experian.comTo order your report, call: 888-EXPERIAN (397-3742) or write: P.O. Box 2104, Allen, TX 75013To report fraud, call: 888-EXPERIAN (397-3742)/ TDD: 800-972-0322 and write: P.O. Box 9532, Allen, TX 75013
- TransUnion – www.transunion.comTo order your report, call: 800-916-8800 or write: P.O. Box 1000, Chester, PA 19022To report fraud, call: 800-680-7289/ TDD: 877-553-7803 and write: Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92634-6790
While the report itself only relays the history of your dealings with creditors, potential creditors can learn a lot from this. Read on to find out how professionals interpret your credit report.
How credit scores work, how a score is calculated
| By Pat Curry • Bankrate.com |
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Ever wonder why you can go online and be approved for credit within 60 seconds? Or get pre-qualified for a car without anyone even asking you how much money you make? Or why you get one interest rate on loans, while your neighbor gets another?
The answer is credit scoring.
Your credit score is a number generated by a mathematical algorithm — a formula — based on information in your credit report, compared to information on tens of millions of other people. The resulting number is a highly accurate prediction of how likely you are to pay your bills.
If it sounds arcane and unimportant, you couldn’t be more wrong. Credit scores are used extensively, and if you’ve gotten a mortgage, a car loan, a credit card or auto insurance, the rate you received was directly related to your credit score. The higher the number, the better you look to lenders. People with the highest scores get the lowest interest rates.
Scoring categories
Lenders can use one of many different credit-scoring models to determine if you are creditworthy. Different models can produce different scores. However, lenders use some scoring models more than others. The FICO score is one such popular scoring method.
Its scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage, according to data from Fair Isaac Corp., a California-based company that developed the first credit score as well as the FICO score.
Fair Isaac reports that the American public’s credit scores break out along these lines:
| Credit score | Percentage |
| 499 and below | 2 percent |
| 500-549 | 5 percent |
| 550-599 | 8 percent |
| 600-649 | 12 percent |
| 650-699 | 15 percent |
| 700-749 | 18 percent |
| 750-799 | 27 percent |
| 800 and above | 13 percent |
Currently, each of the three major credit bureaus uses their own version of the FICO scoring method — Equifax has the BEACON score, Experian has the Experian/Fair Isaac Risk Model and TransUnion has the EMPIRICA score. The three versions can come up with varying scores because they use different algorithms. (Variance can also occur because of differences in data contained in different credit reports.)
That could change, depending on whether a new credit-scoring model catches on. It’s called the VantageScore. Equifax, Experian and TransUnion collaborated on its development and will all use the same algorithm to compute the score. Consumers can order their VantageScores online at Experian’s Web site for $6. Its scoring range runs from 501 to 990 with a corresponding letter grade from A to F. So, a score of 501 to 600 would receive an F, while a score of 901 to 990 would receive an A. Just like in school, A is the best grade you can get.
What’s the big deal?
No matter which scoring model lenders use, it pays to have a great credit score. Your credit score affects whether you get credit or not, and how high your interest rate will be. A better score can lower your interest rate.
The difference in the interest rates offered to a person with a score of 520 and a person with a 720 score is 4.36 percentage points, according to Fair Isaac’s Web site. On a $100,000, 30-year mortgage, that difference would cost more than $110,325 extra in interest charges, according to Bankrate.com’s mortgage calculator. The difference in the monthly payment alone would be about $307.
Powerful little number
If you rented an apartment, got braces, bought cell phone service, applied for a job that involved handling a lot of money, or needed to get utilities connected, there’s a good chance your score was pulled.
If you have an existing credit card, the issuer is likely to look at your credit score to decide whether to increase your credit line — or charge you a higher interest rate, according to a credit scoring study by the Consumer Federation of America and the National Credit Reporting Association.
