Mortgage Barb - Credit Scores

The Basis of your Credit Score

Equifax, Experian, and TransUnion, the three national credit reporting agencies, maintain files on millions of borrowers. Lenders making credit decisions buy credit reports from these agencies to determine the credit risk of the borrowers. These credit reports detail your credit history as reported to each agency by lenders who have extended credit to you. Credit reports list what type of credit you use, the length of time your accounts have been open, and whether you’ve paid your bills on time. It tells lenders how much credit you’ve used and whether you’re seeking new sources of credit. Your credit report reveals many aspects of your borrowing activities. The ability to quickly, fairly and consistently consider all this information, including the relationships between different types of information, is what makes credit scoring so useful.

Check Your Credit Report

You should review your credit report from each credit reporting agency at least once a year and especially before making a large purchase, such as a house or car. You have the right to obtain one free copy of your credit report a year from each of the three major credit reporting agencies. For more information, contact the Annual Credit Report Request Service www.annualcreditreport.com. You can also buy your report and dispute any errors by contacting the credit reporting agencies directly:

Equifax: (800) 685-1111, www.equifax.com
Experian (formerly TRW): (888) 397-3742, www.experian.com
TransUnion: (800) 888-4213, www.transunion.com

If you find an error, the credit reporting agency must investigate and respond to you within 30 days. If you are in the process of applying for a loan, immediately notify your lender of any incorrect information in your report.

Monitor For Identity Theft

Another important reason to regularly check your credit report is for an early detection of identity theft. Identity theft is when someone uses your personal information – such as your name, Social Security number, credit card number or other identifying information without your permission to make purchases, open accounts, take-out loans, buy cars and even get new jobs. If you suspect that your personal information has been hijacked and misappropriated to commit fraud or theft, take action immediately, and keep a record of your conversations and correspondence.

These four basic actions are appropriate in almost every case:

Contact the credit reporting agencies to place a fraud alert on your credit reports and to review your credit reports.
Close any accounts that have been tampered with or opened fraudulently.
File a report with your local police or the police in the community where the identity theft took place.
File a complaint with the Federal Trade Commission.

What's In Your Credit Report?

Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.

Identifying Information

Your name, address, Social Security number, date of birth and employment information are used to identify you. These factors are not used in credit bureau scoring. Updates to this information come from information you supply to lenders. Trade Lines These are your credit accounts. Lenders report on each account you have established with them. They report the type of account (bank card, auto loan, mortgage, etc.), the date you opened the account, your credit limit or loan amount, the account balance and your payment history. Inquiries

When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of lenders who accessed your credit report within the last two years. The report you see lists “voluntary” inquiries, spurred by your own requests for credit, and may also list “involuntary” inquires, such as when lenders order your report before making you a pre approved credit offer in the mail. Public Record and Collection Items Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgments.

How can mistakes get on my credit report?

If your credit report contains errors, it is often because the report is incomplete, or contains information about someone else. This typically happens because: You applied for credit under different names (Mary Jones, Mary Jones-Smith, etc.). A clerical error in reading or entering contact information from a hand-written application. You gave an inaccurate Social Security number, or the number was misread by the lender. Loan or credit card information was inadvertently applied to the wrong account.

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