Lesson - 9

Introduction

Have you ever wondered why you can become pre-qualified for a major purchase without providing income verification, or why you can go online and be approved (or denied) credit within a matter of seconds? The answer is credit scoring.

Credit scoring is a number based on your credit report. It is obtained by comparing the habits of tens of millions of other people and it predicts how likely you are to pay your bills because its predictions are extremely accurate. Credit scores are widely used, and if you have a mortgage, a car loan, car insurance, or a credit card, 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 generally receive the lowest interest rates.

A credit score is used by a lender to help determine whether a person quali- fies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service—specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.

Everyone is assigned a credit score and with conventional financing, you will be viewed as a credit score. Therefore, it is very important that you know your credit report. In this session, we will discuss:

•  How to get your credit reports
•  Know what’s on your credit reports
•  Learn what you can do to improve your credit

These credit reports are maintained and sold by credit reporting agencies (CRAs), commonly known as credit bureaus, such as Equifax, TransUnion and Experian (formerly TRW).

Mortgage brokers and bankers look at all three reports and take the middle score to determine your credit worthiness. You should review your credit scores carefully, and dispute immediately, any incorrect items or discrepan- cies. Scores are generally updated monthly by the credit reporting agencies.

Access to Free Credit Reports

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every

12 months. The FCRA the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

A credit report includes information regarding where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses for the purpose of evaluating your applications for credit, insurance, employment, or renting a home.

Web Address

Your rights are detailed under the FCRA and the Fair and Accurate Credit Transactions (FACT) Act, which established the free annual credit report program.

https://www.annualcreditreport.com/cra/index.jsp

Ordering Free Credit Reports

The three nationwide consumer reporting companies have set up a central web site, a toll-free telephone number, and a mailing address through which you can order your free annual report. To order your free credit report:

• Visit annualcreditreport.com, or
• Call 1-877-322-8228, or
• Complete the Annual Credit Report Request Form and mail it to: –

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

Or, you may print the Annual Credit Report Request Form by going to this web site:

www.ftc.gov/credit

Do not contact the three nationwide consumer reporting companies individu- ally. Free annual credit reports are only available through:

www.annualcreditreport.com

However, if you want to contact the consumer reporting companies by mail, here are the mailing addresses:

Equifax

P.O. Box 740241

Atlanta, Georgia 30374

Experian

P.O. Box 2104

Allen, Texas 75013

TransUnion

P.O. Box 2000

Chester, PA 19022-2000

To purchase a copy of your report, contact:

* Equifax: 1-800-685-1111; www.equifax.com

* Experian: 1-888-397-3742; www.experian.com

* TransUnion: 1-800-916-8800; www.transunion.com

Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.

If you do not have recent credit scores from each of the credit reporting companies, obtain your credit scores as soon as possible. In the space provided, record your personal plan to increase your general knowledge of how credit works, raise your credit scores, and to dispute any items that are incorrect.

Correcting Errors and Repairing Your Credit

If you receive a copy of your credit report and you find errors, you can send a request directly to the credit reporting agencies and have them correct mistakes. Use the addresses provided in the previous section.

Be sure to correct any misspellings of your name so that all accounts are in the same name. You can ask the credit reporting companies to remove any inquiries that are over two years old to get that number down and improve your credit score. If there is a debt on your report that you don’t recognize, you may have been a victim of identity theft.

Managing your credit report is mostly about knowing what people are saying about you and making sure it’s correct. The process may take a little time and it will certainly be frustrating, but the results will be worth it.

Preventing Identity Theft

As Ross points out in his book, skilled identity thieves use a variety of ways to gain access to your personal information. For example, they may get information from businesses or other institutions by stealing it while they’re on the job, bribing an employee who has access to these records, hacking into private records, and conning information out of employees.

Safeguarding Your Personal Information

You may place a fraud alert in your file by calling just one of the three nation- wide consumer credit reporting companies. As soon as that agency processes your fraud alert, it will notify the other two, which then also must place fraud alerts in your file.

* Equifax: 1-877-576-5734; www.alerts.equifax.com

* Experian: 1-888-397-3742; www.experian.com/fraud

* TransUnion: 1-800-680-7289; www.transunion.com

An initial fraud alert stays in your file for at least 90 days. An extended alert stays in your file for seven years. To place either of these alerts, a consumer credit reporting company will require you to provide appropriate proof of your identity, which may include your Social Security number. If you ask for an extended alert, you will have to provide an identity theft report. An identity theft report includes a copy of a report you have filed with a federal, state, or local law enforcement agency.

For more detailed information about the identity theft report, visit:

www.consumer.gov/idthef

Make a plan to safeguard your identity from thieves.  Most of protecting your identity comes down to common sense.  Implement your plan and develop a routine for checking your credit report to catch potential threats

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