Credit History
Credit Reports - Know how you’re getting graded.Credit Score - Learn where you stand.
Credit Counseling - Help is around the click.
Credit Reports
Q: What Is a Credit Report?
A: A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have, the balances, and how regularly you make your payments. It also shows if any action has been taken against you because of unpaid bills.
Four Common Types of Information on Your Credit Report:
1. Identifying Information: Your full name, any known aliases, current and previous addresses, social security number, year of birth, current and past employers, and, if applicable, similar information about your spouse.
2. Credit Information: The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders (accounts are listed by type of loan, such as mortgage, student loan, revolving credit, or installment loan; the date you opened the account; your credit limit or the loan amount; any co-signers of the loan; and your payment pattern over the past two years).
3. Public Record Information: State and county court records on bankruptcy, tax liens, or monetary judgments (some consumer reporting agencies list non-monetary judgments as well).
4. Recent Inquiries: The names of those who have obtained copies of your credit report within the past year (two years for employment purposes).
Q: How Long Does Information Stay on Your Credit Report?
A: Generally, all your credit history information, good or bad, remains on your report for seven years. If you file for personal bankruptcy, that fact remains on your credit report for 10 years.
Q: Who can access your Credit Report?
A:
- Employers: may check your credit report to see how reliable you are before extending you an offer.
- Landlords: may check your credit report before letting you sign the lease.
- Lender: may check your credit report before offering loans that you would need to pay for a car.
- YOU: may check your credit report for free once a year.
Q: How do I order my free credit report?
A: The three nationwide consumer reporting companies have set up a central website, annualcreditreport.com, a toll-free telephone number, 1-877-322-8228 and a mailing address, Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281 through which you can order your free annual report.
To order, visit annualcreditreport.com, 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. The form is on the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer-reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may order your reports from each of the three nationwide consumer-reporting companies at the same time, or you can order your report from each company, one at a time. The law allows you to order one free copy of your report every 12 months from each of the nationwide consumer reporting companies.
Q: How long does it take to get my report after I order it?
A: If you request your report online at annualcreditreport.com, you should be able to access it immediately. If you order your report by calling toll-free 1-877-322-8228, your report will be processed and mailed to you within 15 days. If you order your report by mail using the Annual Credit Report Request Form, your request will be processed and mailed to you within 15 days of receipt.
Q: Why do I have access to free credit reports once a year from each consumer reporting company?
A: 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.
Credit Score
Q: What is a credit score?
A: Credit scoring is a system creditors use to help determine whether to give you credit, and how much to charge you for it.
Q: What is generally on your credit score?
A:
- Payment History
- Amounts Owed
- Number of Accounts Owned
- Length of Credit History
- New Credit
- Types of Credit Used
Q. What is done with this information?
A: Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments on time.
Q. How do credit scores affect my ability to get credit?
A: Generally, consumers with good credit risks have higher credit scores. You can get your credit score from the three nationwide consumer reporting companies, but you will have to pay a fee for it. Many other companies also offer credit scores for sale alone or as part of a package of products. For more information, see Credit Scoring at ftc.gov/credit.
Q. Is there really that much of a difference if you have a good credit score instead of a bad credit score?
A: Below is an example…
You want to buy a used car for $12,000
You put payment of $2,000 down
So you want to take out a loan of $10,000
The loan you are looking at is a 48-month loan
Below is the difference between having an excellent credit score and a not so good credit score:
| Score: | 720-850 | 500-589 |
| APR: | 4.97% | 15.83% |
| Monthly Payment: | $230 | $283 |
| Total Interest Paid: | $1,047 | $3,562 |
| Savings: | $2,515 |
5 Tips for Building Wealth and Managing Debt
1. Pay yourself first by making saving a priority over optional spending.
2. Track all your expenses for a full month, and be sure to separate your needs from your wants. Your budget should factor in savings. Stick to that budget!
3. Set specific but achievable long-term savings goals for major purchases like a car, education, home, and retirement and healthcare expenses.
4. Benefit from the power of compound interest by saving as much as you can as early as you can. Don’t miss out on employer-based retirement programs that often include an employer match. Not taking advantage of this is like leaving money on the table.
5. Benefit from tax advantages that allow you to build savings tax-free for specific purposes like retirement, education and healthcare.
5 Tips on Managing Credit
1. Build savings to avoid higher-cost debt, improve payment options and provide a cushion for emergencies.
2. Pay bills on time to help maintain a good credit score, since your credit score can impact your ability to obtain credit, employment, insurance and housing.
3. Whenever possible, pay more than the minimum payment to avoid finance charges.
4. Comparison shop for new credit, but obtain only the credit you need; and negotiate with existing creditors for best terms.
5. Obtain your free credit report at least once a year to help manage lines of credit effectively and to monitor for instances of identity theft. (www.annualcreditreport.com)
Tips to Improve your Score
- Have you paid your bills on time? You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.
- Are you maxed out? Many scoring systems evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it’s likely to have a negative effect on your score.
- How long have you had credit? Generally, scoring systems consider the length of your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.
- Have you applied for new credit lately? Many scoring systems consider whether you have applied for credit recently by looking at "inquiries" on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn’t counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not considered liabilities.
- How many credit accounts do you have and what kinds of accounts are they? Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.
Credit Counseling
If you're not disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with your creditors, or can't keep track of mounting bills, consider contacting a credit counseling organization. Many credit-counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that just because an organization says it is "nonprofit," there's no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which may be hidden, or pressure consumers to make large "voluntary" contributions that can cause more debt. Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals. Reputable credit counseling organizations can advise you on managing your money and debts help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.