Credit scores are numeric values that rank the risk of ...



CREDIT SCORE – WHAT IS IT?A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it that I will get paid back on time?" The score is generated through statistical models using elements from your credit report; however, your score is not physically stored as part of your credit history on the credit file. Rather, it is typically generated at the time a lender requests your credit report, and is then included as part of the report. Your credit score is a fluid number, which means it changes, as the elements in your credit report change. For example, payment updates or a new account could cause your score to fluctuate. There are many different credit scores used in the financial service industry. Your score may be different from lender-to-lender (or from car loan to mortgage loan) depending on the type of credit scoring model that was used. Credit scores are numeric values that rank the risk of default by an individual according to his credit history, at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae and Freddie Mac, two of the largest purchasers of home loans from mortgage lenders, credit scores have proven to be very good predictors of whether a borrower will repay her loan.Three national credit bureaus (listed on the last page of this report) collect credit information, and provide reports and credit scores to lenders. Lenders often use a "merged" credit report, analyzing the information and scores provided by all three credit bureaus (3-in-1 Credit Report).Many of these lenders use credit scores to help evaluate loan applications. A credit score is just one of many factors considered in the lending process. Lenders look at the entire picture. Even when a credit score is low, lenders often try to find other factors that could overcome negative credit issues and satisfy their lending requirements.Different lenders may have different standards for loan approval, based on credit scores and other factors. It's important to talk with lenders about how your credit profile fits with their requirements and loan programs.FACTORS THAT CAN IMPACT A CREDIT SCOREPoor Payment History - Paying bills late, having bills sent to collection agencies, having foreclosures on home loans, having cars or other purchases repossessed, or declaring bankruptcy.Approaching Your Credit Limit - Keeping high balances on a number of credit accounts, especially when the debt is close to the credit limit.Short Credit History - Having credit accounts for a short time or never having had a credit account or loan.Too Many Credit Applications - Having too many recent applications for new credit accounts or loans.Too Few Credit Accounts - It's better to have a few revolving credit accounts, with low balances, than one or two with balances that are close to your credit limit.Too Many Credit Accounts - Having too many credit cards or loans. Generally, experts recommend having only 3 or 4 credit cards, at most.CORRECT INACCURACIES – FILL OUT A DISPUTE FORMCredit bureaus may not always have accurate or up-to-date information. If you find mistakes on your report, write the creditor and the credit bureau. Fill out their dispute form.When you write the creditor, describe the problem clearly and include any documentation you have (such as a copy of a check or a receipt). It's a good idea to send the letter by certified mail, so you have a record that you mailed the letter and that it was received. Send a written explanation to the credit bureau, along with copies of your documentation. Ask the credit bureau to include a brief explanation of your side of the story, when furnishing reports to lenders. Both the credit bureau and the creditor are legally required to investigate a credit dispute and report back to you in writing within a reasonable time period (usually 30 days).Ideally, you should carry one or two credit cards. It is optional for you to carry one department store card and one gasoline card. Your inclination may be to charge everything on your bankcard and not bother using a department store or gasoline card. However, when creditors look in your credit file they want to see that you can handle more than one credit account at a time. CHECK YOUR CREDIT REPORT ONCE A YEARThere are other reasons to check your credit report. In the past few years, identity fraud has risen dramatically. This is when a thief takes over or opens accounts in your name; running up large balances in goods or cash advances. If you don't check your credit report, it could be months before you even realize there is a problem. Fortunately, any new accounts opened by a thief using your identity will appear on your credit report, alerting you to the fact that identity fraud has taken place.WHAT CAN I DO TO IMPROVE MY SCORE? Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change. Improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application. Nevertheless, scoring models generally evaluate the following types of information in your credit report: Have you paid your bills on time? Payment history is typically a significant factor when that history is reflected on your credit report. It is likely that your score will be affected negatively if you have paid your bills late, had an account referred to collections, or declared bankruptcy. What is your outstanding debt? Many scoring models evaluate the amount of debt you have, compared to your credit limits. When the amount you owe is close to your credit limit than this is likely to have a negative effect on your score. How long is your credit history? Generally, models consider the length of your credit record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances. Have you applied for new credit recently? Many scoring models look at the number of "inquiries" on your credit report. If you recently applied for many new accounts than this may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors, who are monitoring your account or looking at credit reports to make "prescreened" credit offers, are not counted. How many and what types of credit accounts do you have? It is good to have some established credit accounts, although too many may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models loans from finance companies may negatively affect your credit score. Do you pay your credit cards in full every month? Under most models, to improve your credit score you must concentrate on paying your bills in-full and on-time, paying down outstanding balances, and avoiding new debt. Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application, as well as, your job or occupation, length of employment, or whether you own a home. Also, it takes time to improve your score significantly.WHAT DOES A CREDIT REPORT CONTAIN? Although the style, format, and coding may be different, depending on which credit reporting bureau is used, the typical person's credit report includes four of the following types of information: Personal InformationYour full name, nicknames, birth date, social security number, current and previous addresses, and employers. This information comes from any credit application you have completed.Public Record InformationAny relevant court records, such as legal judgments, tax liens, bankruptcies, or, in some states, overdue child support. This information comes from public records. Credit HistoryA snapshot of your past actions. The report lists all loans and credit lines in your name from recent years. Reports vary from bureau to bureau, but generally they show the type of loan, the date you began the loan or opened the credit line, the amount of the loan or credit limit, the amount you still owe, and your payment pattern. For example, the report may list the number of times you've paid late, including the times you were more than 30, 60, and 90 days late. This information comes from companies that do business with you.InquiriesA list of those who have obtained a copy of your credit report within the past two 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. It's common for a potential lender to turn you down because of "excessive inquiries.” This information comes from the credit reporting agency. Most inquiries stay on your credit report for up to two years. HOW DO CREDIT BUREAUS OBTAIN INFORMATION?Credit bureaus can deliver comprehensive nationwide coverage through an on-line database of 190 million consumer credit files, offering complete, credit-granting-decision-support in a clear, concise, reporting format designed for ease of use. They automatically combine multiple files, group key-consumer-data into tightly organized sections, and provide enhanced reporting features for maximum decision-making, speed, and efficiency.HOW LONG DO CREDIT BUREAUS KEEP MY CREDIT INFORMATION? Payment-in-full does not remove your payment history. The length of time information remains on your credit file is shown below. Most information, whether positive or negative, remains on your credit report for 7-10 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. (The time periods listed below are measured from the date in your credit file shown as the “date of last activity filed” accompanying the particular credit or collection account.) Credit AccountsAccounts paid-as-agreed remain for up to10 years. Accounts not paid-as-agreed remain for 7 years. Collection Accounts Remain for 7 years.Courthouse Records Remain for 7 years from the date filed, except: Bankruptcy-Chapters 7 and 11 remain 10 years from the date filed. Bankruptcy-Chapter 13 non-dismissed or non-discharged remains 10 year from the date filed.Unpaid tax liens remain indefinitely. Paid tax liens remain for up to 7 years from the date released.Paid or unpaid judgments remain on file 7 years from the file date. Some State Exceptions:New York State Residents Only: Satisfied judgments remain 5 years from the date filed and paid collections remain 5 years from the "date of last activity.” California State Residents Only: All tax liens remain 7 years from the date filed. Credit Report Guide (provided by )There are three national credit-reporting agencies that maintain records about you—TransUnion,Equifax, and Experian. Each of these bureaus works independently to gather information frombusinesses and update your credit profile. This data is then requested by creditors, lenders,insurers, landlords, and employers to be used in evaluating your financial responsibility.Your credit report data from each bureau is divided in to six main sections:Personal InformationAccount HistoryInquiriesSummaryPublic InformationCreditor ContactsNow, let's go into detail about each of these sections and how they impact your creditworthiness. You can also read more about keeping the information on your credit report accurate and up-to-date in the Credit Learning Center.Personal InformationThe personal information section of your credit report lists some basic information about you. None of the information in this section is included in your credit score calculation. First, your name is listed along with any other names you may use and your date of birth. After this your current address, previous address and employer information is detailed including the full address and the date that this information was reported to the credit reporting agencies.The data in this section is often used to verify your identity or to confirm that the information you provided for an application is accurate. Small variations in this data between the three bureaus are normal as each agency may have their own recording procedures.The personal information section of your credit report may also include a "consumer statement." This is a statement that you asked the credit reporting agencies to add to your report. Commonly, this statement isused to explain a record on your report. For example, "The Smith Bank account from 2004 was a shared account with my ex-husband." This statement does not impact your credit score but may help you clarify asituation to a potential creditor or lender.SummaryThe summary section includes a categorized list of all the accounts on your credit report. This overview allows you to quickly review your credit profile and compare data between the three agencies. The accounts on your credit report are sorted into the following nine categories:Total Accounts0000The total number of accounts - both open and closed - on your credit report.Open Accounts0000The number of accounts listed as "open" on your credit report.0000Closed Accounts0000The number of accounts listed as "closed" on your credit report.Delinquent0000The number of accounts on your credit report that are currentlypast due for payment.Derogatory0000The number of accounts on your credit report, which are negatively impacting your credit score.Balances0000The total amount of debt that you owe for all accounts on your credit report.Payments0000The total amount you owe in monthly payments for all the accounts on your credit report. Public Records0000The number of public records listed on your credit report. This category includes bankruptcy filings, court judgments, and tax liens.Inquiries0000The number of inquiry records on your credit report from the last 2 years. These records are placed when your data is checked by a financial institution for the purpose of an application for new credit. Checking your own credit does not cause this type of inquiry to be reported and does not harm your credit score. Account HistoryThe account history section of your credit report gives detailed information about the credit accounts in yourname. Credit accounts are divided into five categories—real estate, installment, revolving, collection, and other:Real Estate0000-First and second mortgage loans on your0000home.Installment0000 Accounts comprised of fixed terms with0000regular payments, such as a car loan.Revolving0000 Accounts with opened terms with varying 0000payments, such as a credit card account.Collection0000 Accounts are seriously past due accounts that were 0000assigned to an attorney or collection 0000agency.Other0000 Accounts where the exact category is 0000unknown. This could include 30-day 0000accounts, such as an American Express 0000card.Your credit report lists a summary of the details and terms for each account. This summary includes information about the account number, condition, balance, type, and pay status for each account. The summary for collection records is slightly different (see below). The following information is for real estate, installment, revolving, and other type records:Creditor name0000The official account name. This name may be different than what you expect if a larger financial corporation, such as MBNA, manages your account. 0000Account #0000An identifying number for your account. Typically, this would be a credit card number for a credit card account or a loan identification number for a mortgage. A portion of the number is hidden for security reasons. A partial account number is all that is needed to file a dispute about the record.0000Condition0000The account's status is open or closed, according to the most recent update from your creditor.0000Balance0000The amount you presently owe on the account based on the last reported activity. Very recent activities may not yet have appeared in the bureaus' computer system, so this balance may be a few days out-of-date.0000Type0000The account's specific type. Some common types are real estate, automobile, educational and credit card accounts.0000Pay Status0000The account's payment status, according to the most recent update from your creditor.For each account, the report also displays an illustrated payment history over the last 24 months. The key at the top describes each payment history symbol and what it indicates for your account. Green boxes, marked "OK," show that your payment was made on time.0000Not applicable indicates that the payment information has not been reported by the credit-reporting agency.0000Unknown indicates that the credit reporting agency has reported that they are not aware of your payment status this month. This is common for accounts that you have not used in a long time or that you recently opened.0000000001The payment was received by the due date for this month.0000020000The payment was not received as of 30 days after the due date.0000000003Payment was not received as of 60 days after the due date.0000000004Payment was not received as of 90 days after the due date.0000000005Payment was not received as of 120 days after the due date.0000000009Account has Charged off0000Past Due0000The amount of payment overdue as of the most recent reported activity. Very recent payments may take a few days to appear on your credit report.0000High Balance0000The most you have ever owed on this account. In the case of a credit card, this is the highest balance you've ever charged. For a mortgage, it is the initial amount of the mortgage.0000Terms0000This is the number of payments you have scheduled with a creditor. Most commonly this applies to loan accounts. For example, an auto loan may have a repayment plan scheduled over 36 months and a home loan may have a repayment plan scheduled over 360 months.0000Limits0000For a credit card or other revolving account, this is the maximum amount you are approved to borrow.0000Payment0000This is the minimum amount you are required to pay each month toward the account.0000Opened0000The date the account was opened.0000Reported0000The last date when any activity for this account was shown. Activities include payments, credit card billings, and changes in your terms. Very recent activity may not yet show on your account, since it takes time for it to appear in the credit reporting agency's system.0000Responsibility0000This indicates your responsibility for the account. For example individual, joint or co-signer.0000Late Payments0000A summary of your 30, 60, and 90 day late payments over the past 7 years. Please note that the figures in the seven-year history include any late payments shown in the two-year history.0000Remarks0000Notes about the status or condition of your account.Collection accounts are accounts that are seriously past due and have been transferred to an attorney, collection agency, or creditor's internal collection agency. As your debt is transferred between different agencies, you may see several records on your report for the same debt. Only one record should be marked as open at a time. All the collection records and the original debt record will expire from your credit report at the same time.Collection records use a unique summary format on your credit report:Creditor NameThe official name of the company that is currently collecting the debt.0000Account NumberAn identifying number for your account with the collection agency. This is not the same as the account number on your original debt. 0000Original CreditorThe name of the original creditor where you accumulated your debt. This could be an account that is listed on your credit report (such as a credit card) or an account that is not listed on your report (such as a library, video rental, or cell phone company). If this creditor was a medical office, the name may be masked for your privacy.0000ResponsibilityThis indicates your responsibility for the account. For example individual, joint or co-signer.0000ConditionThe current status of your collection record. For example open, closed or paid.0000Original BalanceThe amount of debt owed on the original account before it was transferred.0000Date OpenedThe date the account was transferred to the collection agency.0000Date ReportedThe date of the collection agency's last update to this account record. RemarksNotes about the account as reported to each credit-reporting agency. For example, this section may note that the collector has been unable to locate you or that you have not yet paid the debt. Public InformationThe public information section of your credit report includes publicly available information about legal matters affecting your credit. This could include judgments against you in civil actions, state or federal tax liens, and bankruptcies. Here are definitions of the eight types of public records you could see listed on your credit report:BankruptcyA legal filing that relieves a person of responsibility for all or some of their debts because they are unable to pay.0000Tax LienA claim filed by a local, state, or federal tax agency against a person who owes back taxes. 0000Legal ItemA general filing. This is most commonly a judgment against you in civil action.0000Marital ItemA legal filing related to a marital or divorce issue.0000Financial CounselingA public record indicating that a person has participated in financial counseling.0000Financial StatementA type of lien filed by a creditor against a person's property. This can be filed when a loan is secured against personal property.0000ForeclosureA record indicating that a mortgaged property has been taken over by the creditor because the borrower has defaulted on the loan.0000GarnishmentA record indicating a court order to withhold some or all of a person's wages to repay a debt owed to a creditor. The summary information listed for each of these types of public records can vary. Here are some definitions of common record categories:Type0000The type of record. For example a tax lien, bankruptcy, garnishment, or judgment.0000Status0000Current status of the record. For example released, filed, or dismissed.0000Date Filed/Reported0000Date when the record was initially filed or created.0000How Filed0000The role that you played in the public record. Usually the record is filed either individually or jointly.0000Reference No.0000Identifying number for the record.0000Released/Closing Date0000Date when the record was closed released or judgment was awarded.Court0000The court or legal agency that has jurisdiction over the record.0000Plaintiff0000Plaintiff in the case of a legal judgment.0000Amount0000Dollar amount of the lien or judgment.0000Remarks0000Notes regarding the public record as reported to the credit bureaus.If the public record is a bankruptcy, three other fields will be visible:Liability0000The amount the court found you to be legally responsible to repay. 0000Exempt Amount0000The dollar amount claimed against you that the court has decided you are not legally responsible for.0000Asset Amount0000The dollar amount of total personal assets used in the court's decision. The Asset Amount can include items of value that can be used to pay debts.InquiriesThe inquiry section of your credit report includes records of businessesthat have checked your credit in the last two years. When creditors andlenders review your credit data for the purpose of an application, a"hard inquiry" is listed on your credit report. Too many hard inquiriescan harm your credit score.Each hard inquiry record lists the creditor's name, the date of the request, and the credit bureau that processed the request. Hard inquiries are only recorded on the credit file… maintained by the credit bureau that processed the request.Checking your own credit data or subscribing to a credit monitoring service does not cause a hard inquiry to be recorded and will not damage your credit score.Creditor ContactsThe creditor contact section lists the name and contact information for each creditor that appears on your credit report. This can also include the contact information for creditors that have made inquiries. The creditor's address is listed to the right of the creditor's name. When available, a phone number is listed for the creditor. Creditors without listed numbers should be contacted by mail.THREE MAJOR CREDIT BUREAUS: EquifaxEquifax Information Services, LLCP.O Box 740241Atlanta, Georgia 30374Telephone: 1-800-685-1111TDD: 1-800-255-0056Web address: . Box 2002Allen, TX 75013Telephone: 1-888-EXPERIAN (1-888-397-3742)TDD: 1-800-972-0322Web address: UnionTrans Union LLCConsumer Disclosure CenterP.O. Box 1000Chester, PA 19022Telephone: (800) 888-4213Deaf or Hearing Impaired: (877) 553-7803Web address: you can order your free annual credit report online at , or by calling 877-322-8228. TDD: 1-877-730-4104***By law, each of the nationwide consumer reporting companies must provide to you, at your request, a free credit report once every 12 months.The information in the report above has been obtained from American Consumer Credit Counseling research and the three major credit bureaus, including a great deal from Equifax. All information obtained has been edited for the best use of ACCC’s clientele. ................
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