There are many misconceptions about credit reports, credit scores, the information they hold, and what they are used for. Here is some general information, as well as some of the most commonly asked questions. If you have a question that is not addressed here, please feel free to contact our experts!.
There are 3 major credit reporting agencies:
Equifax
Experian
TransUnion
These credit reports show everything financially related as well as demographic information. Some examples are:
Mortgages
Auto Loans
Credit Cards
Student Loans
Dept store charge cards
Bankruptcies
Liens
Judgements
Foreclosures
Collection accounts
Other creditors that have viewed your file (known as inquiries)
Previous Addresses where you have lived
Phone numbers
Credit score
One of the most important features is your credit score.
Scores range from 300 to 850
Also known as your FICO score (Fair Isaac and Company)
The US average credit score is 674
Your credit score fluctuates daily much like the stock market
Here are some of the most commonly asked questions about credit reports and scores:
Why is the score so important?
How do I obtain a copy of my free credit report? How much does it cost?
Why do banks look at my credit score?
What factors comprise the credit score?
How does the information get on my credit report and get updated?
What do I do if there are errors or inaccurate information on my credit report?
Why is the score so important?
Auto Insurance companies use your score to quote you an insurance rate. The higher your score the better rates you will get.
Banks and Lenders use the score to assign an interest rate on a loan. The higher your score the lower interest rate you will get on the loan.
Landlords and apartment complexes use the score to determine how much of a security deposit they will charge you. Again, the higher your score the less you will pay in a security deposit.
Employers are using credit scores to determine employment. The higher the score the better you appear to a prospective employer. (For an example, read this article, telling how Brenda Matthews was offered a job and then it was recanted after reviewing her credit.)
How do I obtain a copy of my free credit report? How much does it cost?
You can obtain a copy of your credit report at: www.annualcreditreport.com or you can call at: 1-877-322-8228. The system will ask you a series of questions and then a copy of your credit report will be available to view instantly or mailed to you.
The credit report is free. You are allowed 1 free copy per year.
In order to get the credit score each credit reporting agency will charge you a fee...usually around $10.00
Why do banks look at my credit score?
Below is a breakdown of credit scores and the probability of defaulting on a loan. This is what the banks primarily look at when making decisions on loans.
Credit Score Range |
Probability of Default |
|---|---|
800-850 | 1% |
750-799 | 2% |
700-749 | 5% |
650-699 | 15% |
600-649 | 31% |
550-599 | 51% |
500-549 | 71% |
300-499 | 87% |
What factors comprise the credit score?
35% Bills paid on time
30% Ratio of debt to credit
15% Length of credit history
10% Credit Applications
10% Variety of loans
How does the information get on my credit report and get updated?
When you apply for a loan, the information on the application that you provide may get entered in to one of or all 3 of the credit reporting agencies.
What do I do if there are errors or inaccurate information on my credit report?
You need to contact each credit reporting agency in writing or via the internet:
|
Equifax Credit Information Services, Inc. |
|
TransUnion Consumer Solutions |
|
Experian |
Consider:
The US Public Interest Research Group found that nearly one-third of all consumer credit bureau reports contain errors that could cause unfair denial of a car loan, a mortgage or even a job.
You can document in writing the errors and send it back to the credit reporting agency. Make sure you send it certified mail.
You may also want to send a letter to a particular creditor stating the nature of the error. Again, make sure you send the letter certified mail.
Creditors and the Reporting Agencies have 30 days to research the situation and respond back to you. The clock starts ticking from the time they sign for the certified letter.
There is a limit to how long derogatory information can stay your credit report, which varies according to the state you live in. However, it will not necessarily come off automatically when that time limit is reached. Sometimes you must file the request to have it taken off. Know the laws, get educated, and do what you must!
Do you have more questions? Ask our experts!