Credit Reports and Credit Score

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 promotes the accuracy and privacy of information in the files of 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.

Monitoring Your Credit Record

As credit reporting grows in importance, a cottage industry in credit-score deciphering is mushrooming. Consumers can now Sign Up, for a fee, to have their personal credit files monitored by companies and notified via e-mail when their score changes.

Since all creditors do not use the three major credit bureaus (CRAs) equally, monitoring one bureau does not mean monitoring the other two. Mistakes may appear on any of the three reports.

Credit Score

Ever wonder how a creditor decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards and auto loans. More recently, credit scoring has been used to help creditors evaluate your ability to repay home mortgage loans. Credit scoring is a system creditors use to help determine whether to give you credit. 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.

More than 4.5 billion pieces of data are entered each month into credit records, which in turn become part of the more than 1 billion consumer credit reports issued annually in the United States.

Credit records also include information supplied by the consumer (primarily from filling out credit application forms), as well as public records such as bankruptcies, court judgments, overdue child support, foreclosures and liens. By law, credit bureaus can list negative information for seven years. Many national and international creditors, such as banks and department stores, are registered with all three CRAs. Lenders supply the CRAs with information about their customers and in turn have access to credit records.

Obtaining one's credit report and credit score and correcting any mistakes is becoming more important because of score sharing.

A growing number of companies having nothing to do with the business of offering credit (such as insurance companies, cellular phone companies, landlords, and affiliates of financial services firms) are now scrutinizing the data on credit reports and using this information to decide whether to do business with a consumer and how much to charge.

Best Credit Scores

The best credit rates are given to people with scores above 770, but a score of 700 -- out of a possible 850 -- is considered good, according to Fair Isaac. The median score is about 725. Generic interest rate calculations on the Web site show that when the score dips below the mid-600s, those consumers generally qualify only for "subprime" lending and the interest rate starts to climb significantly.

Improving Credit 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 — but 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.

Identity Theft

Identity theft occurs when someone uses your personal information without your permission to commit fraud or other crimes. While you can't entirely control whether you will become a victim, there are steps you can take to minimize your risk. Identity theft is much more than misuse of a Social Security number; it can also include credit card and mail fraud.

Debt Consolidation

Once you've found yourself in debt it may feel like a downward spiral from which you don't know how you'll ever regain your footing. It's hard enough to find simple answers and may seem impossible when the collection agencies constantly call your house and threaten the security of you and your family. The most important benefit of consolidation is that it can offer a fresh start on the road to a more healthy financial situation. They provide you information to help you decide between debt consolidation, debt settlement, credit counseling and budgeting to become debt free.

Credit Card for Problem Credit

If you've never had credit in your own name, it can be difficult to get a car loan or credit card. Having no credit history can be as much of a problem as having a bad credit history. Students, other young peole, and newly divorced or widowed women who have always obtained credit jointly with their husbands often find themselves in this situation.

Free Credit Report is the ONLY authorized source to get your free annual credit report under federal law. The Fair Credit Reporting Act guarantees you access to a free credit report from each of the three nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months.

No matter how you request your report, you have the option to request all three reports at once or to order one report at a time. By requesting the reports separately, you can monitor your credit more frequently throughout the year.

Because the information in your credit report is used to evaluate your applications for credit, insurance, employment, and renting a home, you should be sure the information is accurate and up-to-date. In addition, monitoring your credit is one of the best ways to spot identity theft. Check your credit report at least once a year to correct errors and detect unauthorized activity.

DID YOU KNOW that three little numbers (your credit score) could end up saving you hundreds, or even thousands, of dollars? Lenders use credit scores to help them determine the "credit worthiness" of consumers applying for credit cards, lines of credit, or loans. The applicant's credit score will probably be used for figuring out whether he or she qualifies for credit, and if so, what terms and interest rates he or she will receive.
Credit scores are calculated based on data in your credit reports and, as fluid numbers, change over time, sometimes on a daily basis! That's why its so important to stay on top of your credit reports for changes that could affect your credit scores. Other than pulling your credit report on a daily basis, credit monitoring is the best way to know what's happening in your credit report.
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