Credit Information

Where does the Credit Report Company get its information?
The credit report companies receive their information from national credit repositories including Experian (formerly TRW), Trans Union, Equifax, and public records search firms.

What if I disagree with the information on my credit report?
The information reported to the repositories is only as current and accurate as the information reported by the Creditors. Information should be disputed by contacting the creditors directly and it should be completed in writing. The names, addresses, and phone numbers of most creditors are listed on the last pages of your pre-qualifying credit report and are listed as Direct Check Addresses. Once you have settled the disputed accounts the information is then provided to the repositories that will then make the appropriate changes.

What if I cannot contact the creditor?
You may dispute the account directly with the repository. Creditors have 30 days to document your credit history or the credit repositories must remove it. As part of the updated Fair Credit Reporting Act (FACTA) passed in January 2004, U.S. citizens get a free glimpse at their credit histories from the three agencies. The program expands in sections to cover people in the entire country by September, 2005. The credit repositories may be reached as follows:

Experian (Formerly TRW)
PO Box 949
Allen TX 75013-0949
(800) 643-3334
(214) 390-9191
http://www.experian.com

Trans Union Corporation
Consumer Disclosure Center
PO Box 390
Springfield PA 19064-0390
(800) 916-8800
(800) 682-7654
(714) 680-7292
http://www.transunion.com

Equifax
PO Box 740241
Atlanta GA 30374-0241
(800) 685-1111
(770) 612-3200
(800) 548-4548 residents of Georgia, Vermont or Massachusetts
(800) 233-7654 residents of Maryland
http://www.equifax.com/consumer/consumer.html

Why are my balances not up to date?
The balance reflected on your credit report is the balance reported by the creditor to the repositories. Creditors typically report once a month, so the balance shown may not be the balance, as you know it today.

I am a co-signer on a loan. Why did that loan appear on my credit report?
As a cosigner you have accepted the responsibility of payment in the event of default by the primary borrower. Typically, if you provide proof (12 months canceled checks) that the primary borrower makes the payment and it is current, the payment will not be held against you for qualifying purposes.

My divorce decree states that I am no longer liable for certain accounts. Why are those accounts still showing on my credit report?
A divorce decree does not override the original contract with the creditor. Even if the divorce decree states that your spouse is responsible for the payments, if the loan was originally a joint account, you are not released from legal responsibility on the account from the creditors. You should contact each creditor and seek their legal binding release of your obligation. Typically, these debts will not be used against you for qualifying purposes if a copy of the divorce decree is provided and the accounts are current. For loan approval proof (12 months canceled checks) that the primary borrower makes the payment may be required.

Why is a "Paid" judgment appearing on my credit report as "Not Satisfied"?
For a judgment to show as "Satisfied" a "Notice of Satisfaction" needs to be filed by the plaintiff with the court. If you have such proof it may be forwarded to the repositories to update their records.

How long does negative information stay on my credit report?
Most information, by law, must be removed from the credit history seven years after date of original occurrence. Chapter 7 and chapter 11 bankruptcies may be reported for ten years.

I already had a certain account corrected. How come it is still on my credit report?
You may have provided documentation to a lender. This may have been done to prove that account information on a credit report used for a lending decision was incorrect and you were approved for credit. This does not mean it was cleared with the credit bureaus. Additionally, If you disputed or had credit cleared directly with a creditor it may have not been cleared with all credit bureaus.

What is a credit bureau score, and how is it calculated?
Credit bureau scoring is a scientific way of assessing how likely a borrower with your reported credit history is likely to default on a new loan based on credit history. The scores typically range from 450 to 850 points and is a complex mathematical formula based on millions of consumers credit histories and their track records of defaulting on credit. Higher credit scores indicate a better credit risk.

What types of specific information are used for this score?
The score is based on all credit related data available, not just negative data. Negative credit information includes how bad late payments were (severity), how recent late payments are (recency), and how many there are (frequency). It will also include collection accounts, judgments, and foreclosures. Other types of data used include how much debt do you have outstanding. This includes available credit, total percentage of credit left available, how long has credit history been established, and types of credit used (i.e.. revolving accounts or finance companies may be worse than credit union or bank loans.) Another type of data used is the number of loan inquiries.

How important is my credit score?
The importance of the credit score depends on the lender and the loan program chosen. Some lenders or loan programs do not use the credit score at all. Some lenders and loan programs require that minimum credit score must be met and many loan programs offer different terms based upon different scores. Your loan officer can explain the importance of the score for your particular loan program.

What can I do to increase my credit score?
The credit score is determined by the credit repositories (not the lender or credit reporting company) and is not a point system that changes with every change of information on your credit report. A score may be increased by the following methods;

1. Have incorrect credit histories removed. Getting written proof from the creditor and providing that information to the credit bureaus can do this.
2. Close unused accounts. Too many accounts may indicate that a borrower is an excessive user of credit.
3. Establish long-term on-time payment histories with good credit providers. Accounts established for a long time with good payment history show that a borrower has stability and indicates a trend to repay on time.
4. Consolidate revolving charge cards and or finance companies types loans to fewer accounts with lower payments. This shows that you are a conscientious borrower who understands and values your available credit and its costs.
5. Resolve all derogatory and disputed credit histories. This shows that you maintain good credit relationships and have met all your previous obligations.
6. Limit the number of your credit inquiries. Credit inquiries appear on your credit report for 90 days but the information stays with the credit bureaus for 2 years. Once you have repaired or restructured your finances do not continue applying for more credit.

How long does it take to change my credit score?
The process can take 30 to 60 days to repair incorrect or changed credit histories. The score is based on the database information held at the bureau. This can be changed by contacting them directly or from new information reported from your creditors which is typically done once a month.

CREDIT REPORT SCORING

What is credit scoring?
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy borrowers are, that is, how likely it is that they will repay a loan and make the payments when due. Because a credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application.

Why is credit scoring used?
Credit scoring is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

How is a credit scoring model developed?
To develop a model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own credit scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company. Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like race, sex, marital status, national origin, or religion as factors. However, creditors are allowed to use age in properly designed scoring systems. However any scoring system that includes age must give equal treatment to elderly applicants.

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. Credit score improvement generally depends on how that factor relates to other factors considered by the model. The credit reporting company 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 typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
• What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
• How long is your credit history? Generally, models consider the length of your credit track 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 consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that 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? Although it is generally good to have established credit accounts, too many credit card accounts 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.

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: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

How reliable is the credit scoring system?
Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. But to be statistically valid, credit scoring systems must be based on a big enough sample. Remember that these systems generally vary from creditor to creditor. Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed. Many creditors design their systems so that in marginal cases, applicants whose scores are not high enough to pass easily or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit. This may allow for discussion and negotiation between the credit manager and the consumer.

What happens if you are denied credit or don't get the terms you want?
If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give you a notice that tells you the specific reasons why your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific. Acceptable reasons include: "Your income was low" or "You haven't been employed long enough." Unacceptable reasons include: "You didn't meet our minimum standards" or "You didn't receive enough points on our credit scoring system."

If a creditor says you were denied credit because you are too near your credit limits on your charge cards or you have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time.

Sometimes you can be denied credit because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address and telephone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down for credit. The credit reporting agency can tell you what's in your report, only the creditor can tell you why your application was denied.

If you've been denied credit, or didn't get the rate or credit terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information in your credit report.

CREDIT REPORT ERRORS

Your credit report--a type of consumer report--contains information about where you work and live and how you pay your bills. It also may show whether you've been sued or arrested or have filed for bankruptcy. Companies called consumer reporting agencies (CRAs) or credit bureaus compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, employment, and other purposes allowed by the Fair Credit Reporting Act (FCRA), it's important that the information in your report is complete and accurate. This is something you can do without spending money on a Credit Repair Company. See our Credit Repair Help page for more information

Some financial advisors suggest that you periodically review your credit report for inaccuracies or omissions. This could be especially important if you're considering making a major purchase, such as buying a home. Checking in advance on the accuracy of information in your credit file could speed the credit-granting process.

Correcting Errors
Under the FCRA, both the CRA and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under the law, contact both the CRA and the information provider.

First, tell the CRA in writing what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled.

CRAs must reinvestigate the items in question--usually within 30 days--unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. Disputed information that cannot be verified must be deleted from your file.

• If your report contains erroneous information, the CRA must correct it.
• If an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the CRA must show that you're current.
• If your file shows an account that belongs only to another person, the CRA must delete it.

When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request, the CRA must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.

Second, in addition to writing to the CRA, tell the creditor or other information provider in writing that you dispute an item. Again, include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct-that is, if the disputed information is not accurate-the information provider may not use it again. Accurate Negative Information When negative information in your report is accurate, only the passage of time can assure its removal. Accurate negative information can generally stay on your report for 7 years. There are certain exceptions:

• Information about criminal convictions may be reported without any time limitation.
• Bankruptcy information may be reported for 10 years.
• Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
• Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
• Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Criminal convictions can be reported without any time limit.

Adding Accounts to Your File
Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to CRAs: Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't. If you've been told you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that don't appear in your credit file, ask the CRA to add this information to future reports. Although they are not required to do so, many CRAs will add verifiable accounts for a fee. You should, however, understand that if these creditors do not report to the CRA on a regular basis, these added items will not be updated in your file.

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