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Q: |
What 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 applying. |
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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. |
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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)
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Q: |
Who else can obtain
a copy of my credit report? |
A: |
Only 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. |
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Q: |
What is a credit
score? |
A: |
A 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. |
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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
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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.
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Q: |
How 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. |
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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. |
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Improving or
Correcting Your Credit |
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Q: |
What can I do if I
find incorrect information on my credit
report? |
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. |
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Q: |
How long can
negative information remain on my credit
report? |
A: |
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
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Q: |
How can I improve my
credit score? |
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.
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Q: |
What are my legal
rights? |
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).
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