Understanding credit scores
A Credit Score, officially known as a FICO Score, uses a proprietary mathematical formula developed by Fair Isaac Company to predict an individual’s likelihood to meet his/her financial obligations. A separate FICO score is calculated for you by each of the three national credit bureaus – Experian, Equifax and Trans Union. They calculate your FICO score based on the following credit categories:
· Past payment performance (35% of total score)
Do you pay your bills on time? Consider two things: 1) Being 90 days late on a payment is considerably worse than being 30 days late. 2) The more recent the infraction, the faster your credit scores drop. According to one credit bureau, a 30-day late payment today will hurt your score more than a bankruptcy five years ago.
Tip: Always pay on time, even if the balance is only $10.00.
· Credit utilization (30% of total score)
Do you charge the maximum limit on your credit cards? If your credit balance is spread between 3-4 credit cards rather than a higher balance on 1-2 cards, you most likely will have a better credit score.
Tip: The general rule of thumb is to keep your balances below 30% of your maximum credit limit.
· Credit history (15% of total score)
How long have you had credit? The longer your credit history the better. Newly opened accounts (credit cards, loans, etc.) with high balances may reduce your score.
Tip: Avoid opening a lot of new accounts, even if you pay them in full every month.
· Inquiries (10 % of total score)
Do you authorize anyone to inquire on your credit history? Applying for new credit may lower your credit score. However, multiple inquires for the same types of credit (like a mortgage) within a 14-day period are viewed as only one inquiry.
Tip: Decide which financial institution you plan to go with and then let only them run your credit report.
· Types of credit in use (10% of total score)
Do you accept every offer for credit? Loans from high-risk finance companies can impact your scores more harshly than a loan from a bank or mortgage company.
Tip: Revolving debt is less favorable compared to installment loans.
March 15, 2007
Tips to Prevent Identity Theft
Your personal credit scores are the most influential factors used to determine the rates you pay for mortgages, consumer loans and even some types of insurance. As a result of identity theft and the reporting of inaccurate information, it is imperative that individuals review and correctly maintain their credit information.
Understanding credit reporting
The Fair Credit Reporting Act (FCRA) states that any business that requests your credit file must have a “legitimate business need” and a “permissible purpose,” or written permission from you to obtain your credit file. Examples of who can access your credit files include:
· Credit grantors
· Collection agencies
· Insurance companies
· Employers
Most creditors report your payment history to at least one of three national credit bureaus - Experian, Equifax and Trans Union. Companies can pull reports from these credit bureaus to receive a summary of your credit history. The types of information on those reports include:
· Identifying information (name variances, SS#, etc.)
· Employment information (typically reported by credit grantors for demographic purposes only, not credit decisions)
· Credit information (payment history, etc.)
· Public record information (tax liens, judgments, etc.)
· Inquiries (from car dealerships, credit card companies, etc.)
Protecting your credit score – and your identity
Criminals are becoming increasingly sophisticated at obtaining personal and credit information to assume others’ identities for financial gain. “Identity theft,” as this occurrence is known, is one of the fastest growing crimes in America and affects an estimated 500,000 to 700,000 individuals and their credit each year. To minimize the risk of someone “stealing” your identity and the hassle of restoring your credit identity, you are encouraged to do the following:
· Carry only the cards (credit and ID) that you need to have with you; file others in a safe place at home.
· Sign your credit cards immediately.
· Do not carry your social security card with you. Keep it in a secure, safe place.
· Do not attach a pin number or social security number to any cards you carry with you.
· Do not attach or write a pin number or social security number on anything you are going to discard (e.g. a receipt).
· Shred any document that contains your credit card number before you discard it.
· Check receipts to ensure you received your own and not someone else's.
· Alert your card issuer if you do not receive your statements. Someone could have taken them from your mailbox and could be using your credit card number.
· Do not give personal information or account numbers to anyone until you have confirmed the identity of the person requesting the information and verified that you need to provide them with the information.
· Check your credit frequently (via a credit information service) or subscribe to one of the online credit watch services to monitor your credit for unusual/unexpected activity, such as new account openings or changes to your address.
Finding and maintaining your individual report
Responsibility for your credit lies with you – it is important to obtain credit reports frequently to monitor and respond to any unexpected account activity that takes place. You may order your own credit report directly from each of the credit bureaus for a nominal fee. Consider using one of the following services:
For individual reports and services:
Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374
1-800-685-1111 or http://www.econcumser.equifax.com/
Trans Union
P.O. Box 390
Springfield, PA 19064
1-800-888-4213 or http://www.tuc.com/
Experian
P.O. Box 9600
Allen, TX 75013
1-800-311-4769 or www.experian.com
For 3-in-1 reports and services
TrueCredit
1-800-493-2392 or http://www.truecredit.com/
For specific credit problems
National Foundation for Consumer Counseling, a non-profit organization that assists consumers in dealing with their credit problems.
1-800-388-CCCS (2227), or http://www.nfc.org/
Understanding credit reporting
The Fair Credit Reporting Act (FCRA) states that any business that requests your credit file must have a “legitimate business need” and a “permissible purpose,” or written permission from you to obtain your credit file. Examples of who can access your credit files include:
· Credit grantors
· Collection agencies
· Insurance companies
· Employers
Most creditors report your payment history to at least one of three national credit bureaus - Experian, Equifax and Trans Union. Companies can pull reports from these credit bureaus to receive a summary of your credit history. The types of information on those reports include:
· Identifying information (name variances, SS#, etc.)
· Employment information (typically reported by credit grantors for demographic purposes only, not credit decisions)
· Credit information (payment history, etc.)
· Public record information (tax liens, judgments, etc.)
· Inquiries (from car dealerships, credit card companies, etc.)
Protecting your credit score – and your identity
Criminals are becoming increasingly sophisticated at obtaining personal and credit information to assume others’ identities for financial gain. “Identity theft,” as this occurrence is known, is one of the fastest growing crimes in America and affects an estimated 500,000 to 700,000 individuals and their credit each year. To minimize the risk of someone “stealing” your identity and the hassle of restoring your credit identity, you are encouraged to do the following:
· Carry only the cards (credit and ID) that you need to have with you; file others in a safe place at home.
· Sign your credit cards immediately.
· Do not carry your social security card with you. Keep it in a secure, safe place.
· Do not attach a pin number or social security number to any cards you carry with you.
· Do not attach or write a pin number or social security number on anything you are going to discard (e.g. a receipt).
· Shred any document that contains your credit card number before you discard it.
· Check receipts to ensure you received your own and not someone else's.
· Alert your card issuer if you do not receive your statements. Someone could have taken them from your mailbox and could be using your credit card number.
· Do not give personal information or account numbers to anyone until you have confirmed the identity of the person requesting the information and verified that you need to provide them with the information.
· Check your credit frequently (via a credit information service) or subscribe to one of the online credit watch services to monitor your credit for unusual/unexpected activity, such as new account openings or changes to your address.
Finding and maintaining your individual report
Responsibility for your credit lies with you – it is important to obtain credit reports frequently to monitor and respond to any unexpected account activity that takes place. You may order your own credit report directly from each of the credit bureaus for a nominal fee. Consider using one of the following services:
For individual reports and services:
Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374
1-800-685-1111 or http://www.econcumser.equifax.com/
Trans Union
P.O. Box 390
Springfield, PA 19064
1-800-888-4213 or http://www.tuc.com/
Experian
P.O. Box 9600
Allen, TX 75013
1-800-311-4769 or www.experian.com
For 3-in-1 reports and services
TrueCredit
1-800-493-2392 or http://www.truecredit.com/
For specific credit problems
National Foundation for Consumer Counseling, a non-profit organization that assists consumers in dealing with their credit problems.
1-800-388-CCCS (2227), or http://www.nfc.org/
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