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Know Your Rights
| Protect Your Privacy | Credit
Scoring | Credit Scoring FAQ | Maintaining
Your Credit | Credit Scoring Facts & Fallacies
| Credit Reports | Repairing
Your Credit | Credit Bureaus | How
Are Credit Decisions Made
Know Your Rights
Equal Opportunity Act | Truth
in Lending Act | Fair Credit Reporting Act
It's hardly news that a credit card offers its
user many advantages. What you may not know is that it also comes with
privileges, many of which are protected by law.
In fact, paying with a credit card automatically
locks in safeguards for you that are not available when paying with cash
or by check. Taken together, these protections constitute a kind of "Credit
Card Bill of Rights" that can make your credit card a more useful tool.
Your consumer rights are guaranteed by the following
federal laws. Additional laws and credit card issuer policies further
enhance your protection.
The Equal Opportunity Act
This act protects you from unfair credit discrimination.
It provides equal access to credit privileges, based on your credit history
- or in some cases, the credit history of a spouse or former spouse -
and other financial information.
The bottom line is simple: credit cannot be denied
based on your age, color, sex, marital status, race, religion, national
origin, or the fact that your income is derived from a public assistance
program.
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Truth in Lending Act
This act requires disclosure of interest and fees
that can be charged to you by a credit card issuer. It requires that an
issuer provide you with a clear explanation of how and when charges -
including finance charges, annual fees, service charges, and late-payment
fees - will be applied to your account.
Under this act, if you have a debit or credit
balance of more than one dollar at the end of a billing cycle, card issuers
must supply you with a monthly statement that spells out your current
costs and obligations.
The Truth-in-Lending Act also provides recourse
for consumers who are dissatisfied with a service or merchandise purchased
with a credit card. However, that protection is available only if specific
conditions are met.
The purchase price must exceed $50, and the purchase
must be made in your home state or within 100 miles of your mailing address.
Also, the protection is not available to the extent you've already paid
your credit card bill for the service or merchandise. Finally, you must
have made a good faith attempt to resolve the dispute directly with the
merchant.
What's most important to preserving your rights
- and to assisting your card issuer in helping to resolve the problem
for you - is promptly notifying your issuer in accordance with the instructions
provided on your bill or in your cardholder agreement. Typically this
means writing to your issuer, giving your name and account number, details
of the purchase, and an explanation of why the purchase was unsatisfactory
and what steps you have taken to resolve the problem with the merchant.
And remember, your issuer will be better able to help you if you save
any paperwork connected with the purchase (such as sales receipts, advertisements,
warranties, correspondence, etc.).
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Fair Credit Reporting Act
Under this law you are guaranteed access to the
information in your credit history. Should you be denied credit based
on a credit report, you have the right to know that, and to know the name,
address, and the telephone number of the credit bureau that provided the
report.
If you request a copy of the bureau's report within
60 days of a denial, the credit bureau report must provide it free of
charge. You are also entitled to know the names of anyone else who recently
received a copy of the report so that you may correct any inaccurate data.
If errors appear on the report, you may correct
them by contacting the credit bureau. The correction process must be completed
by the bureau within a reasonable period, usually 30 days.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Protect Your Privacy
How to Remove Your Name | Protection
Against 900# Marketers
This information is provided as a consumer service
by MasterCard International, an association representing 5,000 MasterCard
Card issuers in the United States, and an advocate for the responsible
use of credit. Copyright 1994 MasterCard International Inc. - Reprinted
with Permission
When making a purchase in person (as opposed to ordering
over the telephone), don't let merchants talk you into providing more
personal information than necessary. To combat misuse of personal information,
MasterCard® discourages merchants from recording account numbers on personal
checks and forbids charging your credit card account to cover a returned
check.
In fact, the practice of writing credit card numbers
on checks is now against the law in several states.
To further protect your privacy and prevent fraud, MasterCard
prohibits merchants from requiring you to provide a phone number, home
address, or other personal information as a condition of making a purchase
with your MasterCard card. This policy is reinforced in CA, DE, GA, MD,
MN, NV, NJ, and NY by laws prohibiting such conditional requirements.
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How can I remove my name
from marketing lists?
The Direct Marketing Association compiles lists
of consumers who prefer not to receive mail or telephone solicitations.
DMA members use the DMA lists to remove names from their own mailing lists.
The addresses are:
Mail Preference Service
Direct Marketing Association (DMA)
PO Box 9008
Farmingdale, NY 11735
Telephone Preference Service
Direct Marketing Association
PO Box 9014
Farmingdale, NY 11735
If you write the DMA, you'll be removed from DMA member
lists for three years.
Even though your request becomes effective within five
days of your notifying them, it may take up to three months before you
see a reduction in the amount of solicitations.
Opting out will not end solicitations from all local
merchants, religious and charitable associations, professional and alumni
associations, politicians and companies with which you conduct business.
To eliminate mail from these groups - as well as mail addressed to "occupant"
or "resident" - write directly to each source.
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Protection Against 900-number
Card Marketing
As an additional measure for your protection, MasterCard
was the first to establish a policy prohibiting the use of 900 numbers
and other pay-per-call telephone exchanges to market its cards.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Credit Scoring
Path of a Credit Score | Fairness
As a business solutions company, Fair, Isaac provides
accurate, objective risk assessment tools to lenders. Credit scoring is
one such tool. A credit bureau risk score is a snapshot of your credit
risk picture at a particular point in time. It's a number lenders use
to help them decide: "If I give this person a loan or credit card, will
I get paid back on time?" Fair, Isaac develops the software used by banks
and credit bureaus to generate scores, but Fair, Isaac does not calculate
credit scores or have access to them.
Path of a Credit Score
When you apply for a loan, your bank may send a
request to one of the national credit bureaus to run a credit bureau score.
The credit bureau then uses Fair, Isaac's software to calculate a score
from your credit bureau information. Once the score is calculated, it
is returned to your lender.
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Credit Scoring Fairness
"Treat me fairly."
What is Fair?
fair 'fa(e)r, 'fe(e)r adj: marked by impartiality and honesty: free from
self-interest, prejudice, or favoritism (Webster's Collegiate Dictionary).
Objective. Reliable. Impartial.
The very words associated with scoring imply that
it gives people a fair shake. And it's not just scoring: All of Fair,
Isaac's products and services help lenders and other businesses remove
guesswork, inconsistency and misconceptions from their operations. As
a result, each prospect, each applicant, each consumer - each person -
receives an unbiased appraisal based only on relevant information.
Discrimination Doesn't Add Up
It's an ugly fact that as recently as the early
1970s some lenders in the U.S. blatantly gave preference to white applicants.
In developing scorecards, Fair, Isaac representatives had to explain that,
apart from the ethical considerations, this just didn't make good business
sense. For instance, about 25 years ago, one customer asked us to include
race as a factor in its custom scoring system. At the time, that lender
marked relevant applications with an N or an S, for Negro or Spanish.
Fair, Isaac compared the performance of these borrowers with that of white
borrowers and showed the company that traditional scoring factors - such
as previous performance on loans - worked best in assessing risk. Race
just wasn't predictive; as a result, the scorecards built for the company
did not include race. A subsequent Justice Department investigation ended
with the customer being ordered to use scores as the primary guide in
accepting or declining applicants.
The Equal Credit Opportunity Act, adopted in the mid-'70s,
helped undo many prejudicial practices, and sometimes relied on scoring
as its "enforcer." Several lenders entered into consent decrees requiring
that they use scoring in place of judgmental decision making, to remove
the possibility of race- or gender-based discrimination.
Another Look at Low-Income Applicants
A credit applicant's risk score doesn't meet the
lender's criteria. End of story? Not necessarily. Fair, Isaac has pioneered
a new kind of scorecard focused on applicants with lower incomes, who
may have slightly different payment patterns than the general population.
The Low-Moderate Income (LMI) scorecard doesn't lower the lender's risk
criteria; rather, it helps lenders find more people who meet those criteria.
The LMI scorecard can help a lender make a marginal
improvement to its approval rate for lower-income applicants. It's a margin
lenders covet. And for lower-income applicants who might find credit a
bit harder to obtain in the first place, being approved is 100 percent
better than the alternative.
Can a Score Put You in a New Home?
Since 1995, scoring has made its biggest strides
into the world of mortgage lending. In that year mortgage investors such
as Freddie Mac and Fannie Mae endorsed Fair, Isaac credit bureau risk
scores as part of the underwriting process because the scores zero in
on likely payment performance alone, ignoring subjective considerations.
"Tools that, in an unbiased manner, help separate loans
that are likely to perform well from loans that are less likely to perform
well ensure the continued availability of mortgage money to all creditworthy
borrowers," said Freddie Mac's July 1995 industry letter on "The Predictive
Power of Selected Credit Scores." "Credit scores are an effective way
to help [mortgage lenders] promote this goal. "Fannie Mae echoed this
statement in an October 1995 letter to lenders: "Credit scores can also
be used effectively in efforts to expand home-ownership opportunities
to underserved households."
The benefits of scoring for mortgage borrowers mirror
those in other industries: faster service, less paperwork, and often a
greater chance of being approved.
Which Price is Right?
Price counts in choosing insurance, which leaves
insurers with a dilemma. Setting one premium for everybody means that
the "good" risks are effectively paying for the "bad" risks. If the company
takes a hit from a few large losses, prices rise even for customers who
will probably never file a claim.
Since scores can accurately forecast losses for different
groups of policyholders, some insurers are using score to help determine
price. A low-risk customer may pay much less than the standard premium,
while a high-risk customer will pay a higher premium.
Without accurate pricing, the 'bad' risks are almost
always subsidized by the 'good' risks. When an insurance company can set
its premiums according to the individual risk, it benefits not only itself
but its clients.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Credit Scoring FAQ
About Your Credit Score
| About Inquires for Your Credit Report
| About Lender Decisions
What is a Credit Score?
A credit score is a number lenders use to help
them decide: "If I give this person a loan or credit card, will I get
paid back on time?" It is one of several pieces of information that auto,
mortgage, credit card and other lenders use when evaluating your application
for credit.
A score is a snapshot of your credit risk picture
at a particular point in time. It changes as new information is added
to your credit bureau report or bank file. Only information that is proven
to be predictive of future credit performance is used.
Is there just one type of credit score?
There are different types of credit scores. Credit
bureau scores are based solely on information in consumer credit reports
which are factual records of individuals' credit payment history. Credit
reports are produced by credit bureaus from information stored in bureau
databases, and are provided for a purpose permitted by law, primarily
to credit grantors. Most of the information in your consumer credit report
comes directly from the companies you do business with, but some information
comes from public records.
Other types of credit scores may also include
information from credit applications or bank files.
Who calculates credit scores?
When a lender requests your score, it is calculated
by a computer at the lender or credit bureau. The score is one of many
pieces of information the lender may use in evaluating your credit application.
Why do lenders use credit scores?
Credit scoring helps lenders:
- Base credit decisions on relevant credit-performance
data. Credit scoring gives lenders objective and consistent assessments
so they can, for example, offer applicants credit products they are
likely to qualify for.
- Remove potential bias. Credit scoring's objective
criteria and ease of automation help lenders comply with the letter
and spirit of the law.
- Offer better terms. Credit scoring allows lenders
to "price according to risk." Borrowers with an excellent credit picture
may be offered lower interest rates. And riskier borrowers who might
have been declined altogether in the past now have a chance to get credit.
- Control delinquencies and charge-offs. Scoring's
accuracy gives lenders a reliable method of avoiding poor performing
loans.
- Make more credit available. Lenders using credit
scoring can expand the numbers of applications they can accept, without
taking on a larger pool of poor performing loans.
- Improve operating efficiency. Credit scoring
and automation speed up the entire decision process. Applicants get
answers more quickly.
How are credit scores calculated?
Credit bureau scores are calculated by computer
software containing a scoring model. Each model is built by analyzing
the information contained in large samples of anonymous borrowers' credit
files. Analysts tracked how those borrowers paid their bills and identified
patterns in the credit bureau data that correlated to payment history.
Other models can be developed from different sources
of data. A custom model is developed from a business's own data - information
on its customers from credit application forms and credit bureau reports.
What's in a credit bureau score?
Credit bureau scores are based on five main categories
of credit information. These are, in order from most to least important:
- Late Payments, Delinquencies, Bankruptcies
- Outstanding Debt
- Length Of Credit History
- New Applications For Credit (Inquiries)
- Types of Credit in Use
Late payments, delinquencies and bankruptcies
are important factors in bank lending decisions. People who always pay
their bills on time create a reliable track record that the bank can be
comfortable with. On the other hand, banks are more reluctant to lend
to someone who consistently pays late.
Similarly, the amount of debt you have will help
a bank determine if it should issue you a loan. People who have taken
out a significant number of loans and who already owe a great deal are
a greater risk for banks.
Your credit snapshot will improve over time if
you make changes now in the way you handle credit. Make sure the information
in your credit report is correct, too.
Lastly, someone who goes on a credit shopping
"binge," by attempting to sign up for many different credit lines at the
same time, raises serious questions for lenders. Responsible use of credit
makes it more likely that you will be approved for new loans in the future.
What's not in a credit bureau score?
U.S. law is very specific about what cannot go
into a credit score. The following information is prohibited:
- Ethnic Group
- Religion
- Sex
- Marital Status
- Nationality
What's the most important factor in scoring?
Scores are based on a person's whole credit picture.
No one factor determines a score. A credit score is a composite of both
positive and negative information such as missed payments or bankruptcies
(if any) as well as accounts paid satisfactorily. That said, several areas
of the credit bureau report carry the most weight in a credit score.
Past Payment Performance. The fewer late payments,
the better the score. However, if there are late payments, those that
are most recent are more indicative of future default than those that
occurred in the past. Naturally, having no late payments is best.
Credit Use. People who are heavily extended tend
to be higher risks than those who use credit conservatively. For example,
someone using 75% of his or her available credit represents greater risk
than someone who is using only 25%.
Credit History. The longer someone has had credit
established, the better. For example, a borrower who has had credit for
less than two years represents a relatively higher risk than someone who
has had credit for five years or more. But, having a relatively brief
credit history does not automatically mean higher risk. What carries the
most weight is how people pay their bills and how extended they are on
their available credit.
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About Your Credit Score
What is a good score to get?
A "good" score is a number that matches the level
of risk a lender is willing to accept for a particular loan or credit
card. For example, one score may qualify you for a gold credit card, whereas
another score may indicate you're a better match for a standard card.
Scoring systems have varying numeric scales.
Scores are dynamic and change when new information
is added to the credit file. Also, lenders use different types of scores
with varying numeric scales. In addition, other factors, like application
information, impact lenders' credit decisions. Remember, what's considered
an acceptable score varies from lender to lender depending on the loan
or credit card applied for.
How can I improve my credit score?
Scores reflect credit payment patterns over time
with more emphasis on recent information. To improve a score:
- Pay your bills on time. Delinquent payments
and collections can have a major negative impact on a score.
- Keep balances low on unsecured revolving debt
like credit cards. High outstanding debt can affect a score.
- Apply for and open new credit accounts only
as needed. The amount of your unused credit is an important factor in
calculating your score.
- Make sure the information in your credit report
is correct, too. If you find errors, contact the credit bureau and your
lender.
- Don't try to quickly maneuver your score. It
can backfire and actually hurt your score if you suddenly close several
or all credit card accounts, for example. Or if you try to spread a
large balance across multiple cards rather than leave it on an existing
single card.
What if the information in my credit report is wrong?
You should make sure the information in your credit
report is correct. Review your credit report from each credit bureau at
least once a year and especially before making a large purchase, like
a house or car. Contact these credit bureaus to request a copy:
EQUIFAX (800) 685-1111
EXPERIAN (800) 422-4879
TRANS UNION (800) 888-4213
If you find an error, the bureau 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. Small errors may have little or no effect on your score.
If there are significant errors, however, the lender may disregard the
score.
Once my credit report is updated, how long before
my score is updated?
All updates or changes made to your credit file
are immediately considered in your next credit score. That's because your
Fair, Isaac credit bureau score is calculated at the same time that the
lender gets your credit report from a credit bureau. This is why your
score is really a snapshot of your credit risk picture at a particular
point in time.
Are the Fair Isaac credit bureau risk scores provided
by all three major U.S. credit bureaus?
Yes, credit bureau risk scores developed by Fair, Isaac are provided by
all three major U.S. credit bureaus. They are called BEACON at Equifax,
EMPIRICA at Trans Union and The Experian/ Fair, Isaac Model at Experian.
How about the two major Canadian credit bureaus?
Yes, credit bureau risk scores developed by Fair, Isaac are provided by
the two major Canadian credit bureaus. They are called BEACON at Equifax
Canada and EMPIRICA at Trans Union Canada. Experian does not have a Canadian
credit bureau.
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About Inquires for Your
Credit Report
What is an inquiry on my credit report?
An inquiry is a notation on your credit report
that shows that a lender asked to view your report. It says who asked
for the copy, when they received it, and (if you ask the credit bureau)
their address.
Can inquiries affect my score?
Careful study has shown that inquiries are an indicator
of credit risk. The more inquiries that appear on a borrower's credit
file, the more likely a borrower may be to not pay his or her bills as
agreed. However, inquiries have a relatively small impact on your credit
score. In a credit scoring model there are other, stronger indicators
of future payment performance, such as past payment history and use of
credit, that can offset this one bit of information.
Does every inquiry affect my score?
No. Inquiries fall into two categories: inquiries
that you initiate and inquiries initiated by others. Fair, Isaac risk
scoring software only considers inquiries initiated by you for business
purposes. Examples of this type of inquiry include mortgage applications,
credit card applications and auto loan applications.
Inquiries initiated by others - which are not
considered in a score - include employment inquiries, promotional inquiries
and account management inquiries. Promotional inquiries are those made
by lenders who wish to make you an offer of credit which you did not request.
Account management inquiries are those made by companies with which you
already have credit.
Finally, you can call any of the major credit
bureaus (Equifax, Experian, and Trans Union) and request a copy of your
credit report. This is called a "consumer disclosure" inquiry but it is
not considered when calculating your score.
Will I be penalized for shopping around for the best
interest rate?
Fair, Isaac's risk scoring software takes the appropriate
steps to make sure your score is not lowered because of the multiple inquiries
that might occur as a result of shopping for the best terms in an auto
or home loan.
Here's how it works. Fair, Isaac risk scoring
software ignores all auto- or mortgage-related inquiries that occur in
the 30-day period (called the "buffer" period) prior to the day your credit
score is calculated. And prior to that buffer period, the software also
notes when earlier inquiries were made - if any - and counts ahead 14
days from each one. In any 14-day segment, the software then counts all
auto- or mortgage-related inquires as just one inquiry.
An example might help. Let's say John Doe is shopping
for a mortgage loan and a lender gets his credit report on November 30.
John's credit report also lists two or three other mortgage inquiries
that were made earlier that month. The Fair, Isaac risk scoring software
ignores those previous mortgage inquiries when calculating John's credit
score because they all fell into the 30-day buffer period.
Now let's say that John also purchased a car three
months before he began shopping for a mortgage loan. His car shopping
resulted in three inquiries from different banks and credit unions over
several days. Since they occurred in the same 14-day period, those three
inquiries are counted as just one inquiry by the Fair, Isaac risk scoring
software.
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About Lender Decisions
Who...or what...decides if I get my loan?
Loan officers decide. Computers and credit scoring
are tools they may use to help make the decision. They may use computers
to crunch numbers, automatically obtain credit bureau reports, and generate
customer communications. If a lender uses credit scoring, the computer
will either calculate the applicant's score with its own internal scoring
model, or automatically obtain a score from the credit bureau. Lenders
vary in how they interpret this data and how they weigh it against other
important information such as income, time at employer, the net value
of liquid assets, and value of collateral, if any.
In mortgage lending, both Freddie Mac and Fannie
Mae - the two main government-chartered companies that purchase billions
of dollars of newly originated home loans annually - agree that lenders
should focus both on the score and on other outside factors when making
a decision.
Has credit scoring speeded up loan decisions?
Scoring has helped lenders process credit applications
and make loan decisions faster. For example, without credit scoring lenders
take an average of 12 hours to decide whether to give credit to a small
business. This can be cut to as little as 15 minutes using credit scoring
and automated processing software. For consumers, auto lenders using credit
scoring can deliver a decision within an hour on nearly 60% of auto loan
applications, as show below:
36% Half an hour to one hour
23% Under half an hour
31% One to two hours
10% More than two hours
Source: Consumers Bankers Association
What if I'm turned down for credit?
While lenders are not required to disclose a score,
if you have been turned down for credit, the Equal Credit Opportunity
Act (ECOA) requires that you be given the reasons why within 30 days.
Possible reasons a score is too low might include recent late payments
or too much outstanding credit. You are also entitled to a free copy of
your credit bureau report within 60 days of being declined for credit.
How can I makes sure my credit information is accurate?
Since credit bureau scores are based upon information
in your credit bureau reports, you should check your reports from each
of the three bureaus to make sure your credit information is accurate.
If you are considering applying for a large loan for a car or house, check
your credit bureau reports before you start looking. Correcting any problems
early will help make your loan application process simpler and easier.
There are three main credit bureaus in the U.S.
Each may have slightly different information in your file, so be sure
to request a copy of your credit report from each. If you've been turned
down for credit, the issuing credit bureau is required by law to provide
you with your report for free. Carefully review the report to verify that
all of the information is correct. If you find any mistakes, report them
to the bureau immediately. By law, the bureau must respond to your inquiry
within 30 days.
You can reach the bureau at the following phone
numbers:
EQUIFAX: (800) 685-1111
EXPERIAN: (800) 422-4879
TRANS UNION: (800) 888-4213
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Maintaining Your Credit
Benefits of a Good Credit
Score
There is no mystery about how people can improve their
scores. Credit scores reflect people's long-term patterns of credit use
and repayment history over time. Scores automatically improve as one's
overall credit picture gets better. That means showing an historical pattern
of paying your bills on time and using credit conservatively. Maintaining
good credit is a lot like maintaining a car - you want to make sure it
is always in good repair, and attend to any problems right away.
A few specifics
Remember that you are ultimately in control of your
credit score. The best way to be eligible to receive credit is to responsibly
manage your credit obligations. Here are a few specific tips:
- Always pay your bills on time.
- Keep credit card balances low.
- Apply for new credit sparingly.
- Check your credit report periodically for any
inaccuracies.
- Correct any inaccuracies with all three national
credit bureaus and your lender. Do not rely on "so-called" credit-fixing
services. Fix errors at the source.
- Minimize the number of times you give creditors
permission to check your credit record. Such credit checks are called
"inquiries."
- No credit score is forever. You can take steps
today to begin improving your score.
Benefits of a Good Credit
Score
Whether you're currently looking to buy a house or car,
or you expect to buy one in the near future, you'll be happy to learn
that over the last several years the path to securing a loan has become
shorter and easier to navigate. That is due in part to the use of credit
scoring in those industries. Scores give lenders an accurate and objective
assessment of how likely you are to repay the loan.
How does scoring help me?
Credit scoring offers real benefits to consumers:
- Scoring ensures equitable treatment. Scoring
evaluates all applicants' credit information by the same criteria. Opinions
do not enter the scoring equation - facts replace myths and personal
prejudices about what constitutes a good future customer.
- Scoring speeds credit decisions. Scores help
lenders return decisions more quickly and sometimes with less applicant
information, even over the phone or over the Internet.
- Scoring helps make more credit available. By
helping lenders control losses and costs, scoring helps make more credit
available to customers. Historically, the less information lenders have
available to distinguish among credit risks, the more conservative their
lending policy tends to be. This means less credit is available to everyone
-- lower-risk customers as well as higher-risk -- and the cost of that
credit is greater. Credit scoring gives lenders an important piece of
information that allows them to lend to more, not fewer, people.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Credit Scoring Facts &
Fallacies
Fallacy: With credit
scoring, computers are making the lending decisions.
Fact: Computers don't
make lending decisions, lenders do. Computers analyze credit information
to produce a score, but individual lenders decide what scores are acceptable
for different loans or credit cards. Some lenders accept higher risk applicants.
Some use scores to help determine when to request more information from
the applicant.
Fallacy: A poor score
will haunt me forever.
Fact: Just the opposite
is true. A score is a "snapshot" of your risk at a particular point in
time. It changes as new information is added to your bank and credit bureau
files. Scores change gradually as you change the way you handle credit.
For example, past credit problems impact your score less as time passes.
Lenders request a current score when you submit a credit application,
so they have the most recent information available.
Fallacy: Credit scoring
is unfair to minorities.
Fact: Scoring considers
only credit-related information. Factors like gender, race, nationality
and marital status are not included. In fact, the Equal Credit Opportunity
Act (ECOA) prohibits lenders from considering this type of information
when issuing credit. Independent research has been done to make sure that
credit scoring is not unfair to minorities or people with little credit
history. Scoring has proven to be an accurate and consistent measure of
repayment for all people who have some credit history. In other words,
at a given score, non-minority and minority applicants are equally likely
to pay as agreed.
Fallacy: Credit scoring
infringes on my privacy.
Fact: Credit scoring
evaluates the same information lenders already look at - the credit
bureau report, credit application and/or your bank file. A score is
simply a numeric summary of that information. Lenders using scoring
sometimes ask for less information - fewer questions on the application
form, for example.
Fallacy: My score
will drop if I apply for new credit.
Fact: If it does, it
probably won't drop much. If you apply for several credit cards within
a short period of time, multiple requests for your credit report information
(called "inquiries") will appear on your report. Looking for new credit
can equate with higher risk, but most credit scores are not affected by
multiple inquiries from auto or mortgage lenders within a short period
of time. Typically, these are treated as a single inquiry and will have
little impact on the credit score.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Credit Reports
What information does
a consumer credit report contain? | What
information is not in a credit report? | How
can I get a copy of my credit report? | How
much does a copy of your credit report cost?
What is a consumer credit
report?
A consumer credit report is a factual record of
an individual's credit payment history. It is provided for a purpose permitted
by law, primarily to credit grantors. Its main purpose is to help a lender
quickly and objectively decide whether to grant you credit.
If you are one of the 190 million people in the
United States with a charge account, car loan, student loan or home mortgage,
then information about you probably is stored in a consumer credit database.
Most of the information in your consumer credit
report comes directly from the companies you do business with.
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What information
does a consumer credit report contain?
The typical consumer credit report includes four
types of information:
- Identifying information: your name, current
and previous addresses, telephone number, Social Security number, date
of birth, and current and previous employers. (On your copy of your
credit report, but not the version provided to others, your spouse's
name may appear.) This information comes from your credit applications,
so its accuracy depends on your filling out the forms clearly, completely
and consistently each time you apply for credit.
- Credit information: specific information about
each account such as the date opened, credit limit or loan amount, balance,
monthly payment and payment pattern during the past several years. The
report also states whether anyone else besides you (your spouse or cosigner,
for example) is responsible for paying the account. This information
comes from companies that do business with you.
For open accounts, positive credit information
remains on your report indefinitely; most negative information remains
up to seven years. For closed accounts, information remains seven
years.
- Public record information: federal district
bankruptcy records; state and county court records of tax liens and
monetary judgments; and, in some states, overdue child support. This
information comes from public records.
Bankruptcy information can remain on your
credit report up to 10 years; other public record information can
remain up to seven years.
- Inquiries: the names of those who obtained
information about your credit history.
Inquiries that you initiated (by applying
for a new credit card, for example) become a part of your credit report
and may be considered by those who review your credit history. They
remain on your report up to two years.
Inquiries resulting from unsolicited offers
of credit and the monitoring by credit grantors of your current credit
accounts are examples of inquiries that appear only on your copy of
your credit report. They remain on the report from one to two years.
On your copy of your credit report, addresses
of those who inquired are included for your information.
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What information is
not in a credit report?
Your credit report does not contain - and does
not collect - data about race, religious preference, medical history,
personal lifestyle, political preference, friends, criminal record or
any other information unrelated to credit. Nor is there information about
your checking or savings accounts.
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How can I get a copy
of my credit report?
To purchase a copy of your credit report call
Experian
(888)-EXPERIAN
Equifax
(800)-685-1111
Trans Union
(800)-999-4213
Please have the following information on-hand when you
call. All of the information is needed to compile a complete and accurate
copy of your credit report.
- Full name (including generation, such as Jr.,
Sr., III)
- Current and previous addresses (for a five-year
period) with zip codes (if you have moved within the past six months,
include two proof documents such as copies of a utility bill, credit
card billing statement, or driver license.)
- Spouse's first name, if married
- Social Security number
- Date of birth
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How much does a copy
of your credit report cost?
The cost varies depending on your circumstances.
A credit report may be obtained:
- At no charge, whenever your request for credit,
insurance, employment or rental housing is denied based on information
received from a credit bureau, if you contact us within 60 days of the
denial. You also may receive a free copy if "adverse action" was taken
against you based on information in your credit report (e.g., your interest
rate was raised or your credit limit was decreased). The name of the
credit reporting agency that provided your credit report and how to
contact them for a copy will be provided in writing by the company that
declined your credit application or took adverse action. Some states
require credit reporting agencies to provide their residents a free
report each year even if they are not denied credit.
- For a fee of $8 in most states if you haven't
been denied credit, employment, insurance or rental housing recently.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Repairing Your Credit
What should I do if I find an error in my credit
report?
First, get a copy of your report and review it
carefully. If you find an error, simply call or write the credit bureau
(as instructed on your credit report). The bureau will check with the
source of the information and send you an update. If you continue to disagree
with the information, you can add a statement to the credit report.
Please be specific with your dispute: "I was never
late with my payment" or "That is not my account." Simply saying an item
is wrong does not give the bureau, or the source of the information, enough
detail to help you resolve your dispute.
Because the credit bureau must ask the source
of the information for a response, the dispute process can take up to
30 days.
Can "credit repair" clinics fix my bad credit?
Some consumers pay so-called credit clinics hundreds
and even thousands of dollars to "fix" their credit report, but only time
can heal bad credit.
Most credit reports contain easy-to-follow instructions
for disputing information at no charge. Inaccurate information will be
changed or deleted. Federal law mandates the time periods that accurate
negative information remains on a credit report.
If you need help repaying creditors, managing
debt or setting up a personal budget, consider a nonprofit credit counseling
organization that is a member of the National Foundation for Consumer
Credit. For the office nearest you, call 1-800-388-2227.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
Credit Bureaus
How does a credit bureau
help me? | Do credit bureaus decide whether
I should get credit?
How does a credit
bureau help me?
If you're like most consumers in the United States,
your ability to own a home, purchase a car, fund a college education,
travel and make routine purchases hinges on your responsible use of credit.
Because an automated credit reporting system works quietly in the background
on your behalf, you have unlimited options in your financial life. For
example, you can:
- Purchase a home in one area of the country
based on the good credit record you established while living in another
part of the country
- Shop for and be offered financial services
from institutions in other regions of the country
- Pay for emergency medical treatment
- Negotiate a deal for a new car and drive it
off the lot within a few hours
- Catch an airplane at the last minute
Credit reporting also helps foster intense competitive
marketing battles among financial services providers. This competition
provides you with:
- Lower interest rates
- Reduced annual fees
- Special toll-free customer service phone numbers
- Customer recognition programs
- Purchase protection plans, among other benefits
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Do credit bureaus
decide whether I should get credit?
No. Only credit grantors make lending decisions.
A credit bureau's business is credit reporting.
It collects information from credit grantors such as banks, savings and
loans, credit unions, finance companies and retailers. It stores this
information in a computer database, then provides it to credit grantors
when you apply for a new credit card or loan.
Each credit grantor decides what standards you
must meet to be granted credit. The credit bureau does not track the decision
a credit grantor makes after ordering a credit report, favorable or not.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
How Are Credit Decisions
Made
Potential creditors review credit applications
primarily in relation to risk. They try to predict whether you'll repay
your debts on time by evaluating your character, capacity and collateral/capital.
- Character: Your length of residency and employment
help credit grantors develop a feeling of your personal stability. They
get this information from your credit application. Lenders evaluate
your financial character by reviewing your existing credit relationships:
credit cards, bank loans, mortgages, etc. This information comes primarily
from your credit report.
- Capacity: Your living expenses, open credit
limits, current debts and other payments give lenders a sense of how
much debt you can realistically pay given your income. Lenders look
at your living expenses, current debts and the additional payments that
the proposed new obligation would require. This information comes from
your credit application and credit report.
- Collateral/capital: Whether the loan is secured
by a down payment or asset - and how much that down payment or asset
is worth - helps lenders determine the terms of the credit or loan they
extend to you.
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Learn
How to Legally Establish New Credit File
Even Get Credit After Bankruptcy!
We appreciate
any comments or feedback, e-mail us at info@legalcredit.com.
www.LegalCredit.com
P.O. Box 2631
Pinellas Park, FL 33780
Copyright 2003 "Legal
Credit Secrets Exposed" LegalCredit.com, LLC.
All responsibility for the use or misuse of this product/service information
lies solely on the customer. The product/service offered is not sold
to defraud or scam current creditors. Even though you can establish
credit and financial worthiness through a new profile, you are responsible
for all current debts owed. All local & federal laws apply.
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