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is a credit report?
A: A credit report is a file that contains information
about how you pay your bills, where you work and live, and any information that
is of public record, i.e., bankruptcies, judgments, etc. Lenders can order a
credit report using your name, address, and social security number to verify
that your credit history is satisfactory for the loan for which you are
Q: Who gathers and provides the information that appears on
my credit report?
A: Consumer Reporting Agencies (CRAs) gather and sell the
information that appears on your credit report. A credit bureau is the most
common type of CRA. These CRAs have responsibilities under the Fair Credit
Reporting Act (FCRA). The FCRA was also designed to expand your rights and to
promote accuracy and privacy of the information on your credit report.
Q: How can I obtain a copy of my credit report?
A: There are three main
credit bureaus that provide credit information to CRAs. You may write or call
any of these bureaus to obtain a copy of your credit report. Keep in mind that
the bureaus do not share information with each other, so you should contact all
three to get a full picture of your credit. Equifax Information Service Center
P.O. Box 740241 Atlanta, GA 30374-0241 1-888-909-7304 (phone) Experian
(formerly TRW) National Consumer Assistance Center P.O. Box 2104 Allen, TX
75013-2104 1-888-397-3742 (phone) Trans Union Corporation Consumer Disclosure
Center P.O. Box 390 Springfield, PA 19064-0390 1-800-888-4213 (phone)
Q: Who else can obtain a copy of my credit report?
individuals and companies with business needs as recognized by the FCRA may
obtain a copy of your credit report. The most common business reasons a company
will obtain your credit report is when you apply for credit, employment, or
insurance. No employer can obtain a copy of your credit report without your
prior written consent. Medical information cannot be provided to another party
without your permission. Some creditors and insurers may use limited file
information as marketing tools for their unsolicited credit and insurance
offers. All unsolicited offers must include a toll-free phone number for you to
call to remove your name and address from their lists. An additional step you
can take to keep your name off lists permanently is to complete a CRA form
prepared for this purpose.
Q: What is a credit score?
credit score is a number based on a calculation by a mathematical model using
pre-determined parameters to evaluate your credit worthiness. Credit scoring is
based on your current and past credit history. Your credit score is a summary
of your credit history, your current credit, and even a prediction of your
future credit performance. The three major credit bureaus worked with Fair
Isaac Company (FICO) to develop credit scoring models. Each credit bureau can
calculate your credit score based on the information in that bureau's credit
files. This credit score is then used by the lender/broker in determining
whether you qualify for the loan for which you are applying.
Q: How are
credit scores calculated?
A: Credit scores are calculated using
mathematical tables with points assigned to each piece of information. These
"scoring models" include factors that have been proven to predict future credit
performance. The following are some examples of factors that will be used to
calculate a credit score: Number of open credit accounts Amount of credit
balances Length of credit history Number of credit inquiries Past and current
payment delinquencies Other derogatory credit
Q: How can I find out
what my credit score is?
A: Lenders/brokers are not required to tell you
your credit score, although many will. If you have been turned down for a
mortgage because of your credit score, the lender/broker is required to tell
you the reasons that your score is too low. If you do find out what your credit
score is, keep in mind that a credit score is just part of the lending
decision. If you were turned down for financing, make sure to find out if the
decision was based in whole or just part on your credit score.
are credit scores used in making lending decisions?
A: Your credit score is
a quick, reliable indication of your future credit performance. In mortgage
lending, the higher the score, the lower the credit risk. However, when you are
applying for a mortgage, many other factors will be used in making a loan
decision. Also, a bad credit score with one lender might be a good credit score
with another lender. Your lender will use your credit score as one of the
factors in determining whether you qualify for the loan for which you applied.
Q: How does credit scoring affect me?
A: One of the main consumer
benefits of credit scoring is the reduction in time it takes to obtain a
lending decision. If your credit score fits into a lender's requirements, your
loan decision will take less time because of computerized underwriting systems.
Another benefit involves the anonymity of the credit score. The credit score
DOES NOT include factors like race, martial status, place of residence, or any
other possible discriminatory areas. The credit score is solely based on your
past and present credit performance. The only disadvantage of credit scoring is
the fact that scores are calculated using information provided by a credit
bureau. If any of the information reported to a credit bureau is incorrect or
derogatory, your credit score will be affected. Luckily, mortgage
lenders/brokers are aware of this potential problem and ways exist to correct
your credit report if needed.
Improving or Correcting Your
Q: What can I do if I find incorrect information on my credit
A: If you find an inaccuracy on your credit report, you should
definitely correct it. It is up to you to begin the process of correcting your
report. Luckily, the Consumer Reporting Agency (CRA) and the information
provider have responsibilities under the Fair Credit Reporting Act (FCRA). You
must contact the information provider and all three of the credit bureaus to
protect your rights under the FCRA. If you are applying for a mortgage at this
time, you should also make your lender/broker aware of any mistakes on your
credit report. The best way to dispute inaccurate information is to contact, in
writing, each CRA. The CRAs are required to investigate the items you are
questioning unless they believe your dispute to be frivolous. This must usually
be done within 30 days. Their investigation includes forwarding your dispute to
the information provider in question. The information provider must then review
all relevant information and report their findings to all CRAs. If the
information on your credit report was incorrect, your file must be corrected.
You will receive the written results and a copy of your credit report from the
CRA if the dispute results in a change. At the same time you contact each CRA
in writing, you should also contact the information provider directly.
Q: How long can negative information remain on my credit report?
Most negative information can be reported on your credit report for 7 years.
Exceptions include: Bankruptcies may be reported for 10 years Information
reported for a job application with a salary of more than $75,000 has no time
limit Information reported for a credit or life insurance application for more
than $150,000 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
Q: How can I improve my
A: No one change you make to your credit report will have a
large impact immediately. You can do some things to improve your score in the
future however. Pay all of your creditors on time. Late payments and
collections have a negative impact on your credit score. If you have a lot of
accounts with delinquencies that have also been closed, obtain new credit and
pay on time. You need good payment records to help offset any past poor payment
histories. Pay down loan balances. If your balance on an account is right at
the credit limit, your credit score will be affected negatively. Be careful
about letting people obtain your credit report. The more companies that request
your credit report, the lower your credit score.
Q: What are my legal
A: The FCRA gives you specific rights as a consumer. You might also
have additional rights under your state's laws. Some of these rights include:
You can dispute inaccurate information with the CRA. You must receive a written
report of the investigation into any dispute from the CRA along with your
credit report. Inaccurate information must be corrected or deleted. If you have
been denied credit, insurance or employment based on information provided on a
credit report, the lender, insurance, or employer must provide information
regarding the CRA they used to obtain your credit report. You can dispute
inaccurate information with the information provider. If the disputed
information is proved to be incorrect, the error must be corrected and never
reported again. If any information on your report is outdated (i.e., 10 years
for a bankruptcy) it must be removed. You may sue violators of the FCRA in
state or federal court (see complete FCRA for details).
Questions about your credit?
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