Quick Review: Check Your Credit

The FICO score is a mathematical calculation the measures your probability to repay a loan

• measurements are base upon a number of factors that include:
  
  • your current outstanding debt
  • places and the number of times you have applied for credit
  • the kind of credit you have taken out in the past
  • late payments in 30, 60, and 90 day increments
  • over extension of your credit lines
  • liens
  • garnishments
  • bankruptcy
    
    
• lenders often use the FICO score when reviewing an applicant's request for credit
  
  an applicant with a high FICO score will likely receive instant approval with better than normal rates and terms — which means lower cost when you borrow money
  
  
  you can review more information about the FICO credit score:
  http://www.myfico.com
  

• Scores 700 and up are considered excellent.
  
• Most lenders will categorized this group as A rating.
  
• Scores within this group will have access to the best interest rates and terms.
  
• About 60% of the U.S. population falls within this credit range.

• Scores 600 to 699 are considered good credit.
  
• Most lenders will categorized this group as B rating.
  
• Scores within this group will have access to good interest rates, but may not qualify for the very best interest rates and terms.
  
• About 27% of the U.S. population falls within this credit range.

• Scores 500 to 599 are considered risky credit.
  
• Most lenders will categorized this group as C rating.
  
• Scores within this group may still qualify for a loan, but may have to pay at least two percentage points or more higher interest rates than the group in the excellent category.
  
• About 12% of the U.S. population falls within this credit range.

• Scores 499 and below are considered very risky credit.
  
• Most lenders will categorized this group as D rating — which means the applicant may have foreclosure, liens, and credit judgments.
  
• Scores within this group may still be eligible for a loan, but may have to pay at the maximized rates determined by State and Federal regulations.
  
• About 1% of the U.S. population falls within this credit range.

What's Inside: your credit report will maintain the following:

• Your current outstanding debt
• Places and the number of times you have applied for credit
• The kind of credit you have taken out in the past
• Late payments in 30, 60, and 90 day increments
• Over extension of your credit lines
• Liens
• Garnishments
• Bankruptcy
  
  
• Credit bureaus report negative information for seven years and bankruptcy information for ten.

Who Has Access

By signed authorization through an application or other contractual agreement, the following parties gain access to your report:

• Banks, credit unions, finance companies, other lenders
• Retailers, department stores, credit card companies.
• Landlords, utility companies, phone companies.
• Hospitals, doctors, dentists, insurance companies.
• Car dealers, mortgagers.
• Investigators, lawyers, courts.
• Any party who can offer just cause and/or has access as a member of a credit reporting agency.

Why Check Your Report

• Simple. You need to check it for accuracy.
  A tarnished credit report can lower your credit score. A tarnished credit report can cost you money and career opportunities.
  
  
• You will pay a higher interest rates
  on your car and home mortgage if your credit report shows some questionable activity?
  
  Did you also know that you may be charged higher premiums on insurance if you have questionable credit?
  
  And you also might be surprised that many employers run credit checks on potential job applicants and/or for promotions.
  
  Your goal is to ensure that your credit report reflects accurately your credit and financial management skills.

1: Check for Errors and Inaccuracies

About 1-in-4 credit reports contain errors that can affect a credit decision. These errors may include human input error, incorrect information reported about your account, or addition of some other account information that has a similar name or SSN number to yours.

You should check you report at least annually and prior to submitting a home mortgage or other application.

2: Tracking Payments

The typical household will during one month make 1 mortgage payment, 4-5 credit card payments, 1-2 student loan payments, 1-2 auto loan payments, 4-5 utility payments, and the list goes on.

Multiply this number of payments by 12 and you can imagine the probability that 1 or more payments were recorded incorrectly by your creditor.

You should check your credit report to make sure that your payments has been properly recorded.

3: Identity Theft

This is probably the main reason why you should check your report regularly. Identity theft occurs when someone assumes your name and social security number to open credit accounts, divert card statements to another address, and drive up debts.

Identity theft can destroy your credit and trap you into a complicated process to clear your good name and background.

Checking your credit report regularly can help prevent identity theft. It shows credit activity being made in your name. You can monitor over time whether a particular inquiry or credit account was open without your authorization.

We have more information about ID Theft at our parent site: SayLending.com.

4: Inquiries

Every time you make a request for credit or enter into some contractual service, your lender or service provider may check your credit, which places an inquiry on your credit report. Multiple inquiries over a short period of time can lower your credit rating.

Your credit report will show the inquiries made to your report. It is important to know who has made an inquiry, whether such inquiry was authorized by you, and most importantly, whether any of the inquiries are related to Identity Theft.

5: Credit Fraud — Unauthorized Charges

A credit report will show the credit accounts that are still open but with limited or zero activity.

Question: if someone confiscated your credit account, how would you note any activity to the account if the creditor has on their records your previous address? Reviewing your credit report allows you to catch new activity on accounts that may be fraudulent.

Step 1: Get Copies of Your Credit Report

• Get copies of your credit report from all three credit bureaus.
  
  You may close this window and connect to each credit reporting agency individually, or get your 3-in-1 report.
  
  It is important to review all three. Some creditors may only report to 1 or all 3 major credit agencies.
  
  — get a FREE copy of your credit report
  — view all three credit agencies in one report

Step 2: Check for Inaccuracies

• Review each report for inaccuracies and negative items that do not correctly reflect your credit position.
  
  Look for collection accounts:
  
  — Equifax lists them at the end of the report
  — Trans Union mixes them throughout the report.
  — Experian gives a brief paragraph explanation of all accounts.
  
  
• If you don't recognize any the accounts, don't assume they are yours.

Step 3: Dispute Your Inaccuracies

• Dispute all inaccuracies and negative items in your report. You can file a dispute online with the individual credit agency. Note that you must file individual disputes with each credit agency if the inaccuracy is found on all three agency reports:
  
  Experian:
  https://www.experian.com/consumer/...
  
  Equifax:
  https://www.econsumer.equifax.com/...
  
  TransUnion:
  http://www.transunion.com/...
  
  
• You may also send a written notice to each credit bureau using the sample format below:

  Name of Credit Reporting Agency
  Street Address
  City, State and Zip Code
  
  From:
  Your Name and Social Security number
  Street Address
  City, State and Zip Code
  Telephone Number
  
  Date:
  Re: Correction of Errors in Credit Report
  
  Dear (Name of Credit Reporting Agency):
  Please be advised that the following error(s) appear(s) in my credit report issued by your agency on the date of (mm/dd/yyyy):
  

  1	List Credit Name	Identify the Dispute	List Comments (be specific)
  2
  3
  (if you have any documentation to support your claim, forward copies along with your letter)

  Please correct my credit report to remove this incorrect information. (describe nature of error; be specific)
  _______________________________________
  _______________________________________
  _______________________________________
  _______________________________________
  
  Please correct my credit report as soon as possible to remove this incorrect information. You may contact me at the number above if you have any questions regarding this matter.

  Sincerely,
  
  (your signature)

Step 4: Clean Up Your Report

• After you remove all inaccuracies, your next task is to remove negative items that affect your score; most notably delinquent and non-payment accounts.
  
  Contact each individual creditor (or collection company) to negotiate a manageable repayment plan. Explain your financial situation.
  
  Some companies will drop the interest, forgive part of the loan, or offer extended terms that allow you to make reasonable repayments.
  
  Your last resort is to pay the entire outstanding balance in full.
  
  Request a written agreement that that the creditor will remove the bad rating on your credit report if you meet the terms of their repayment plan.
  
  Make sure you live up to your agreement. The last thing you want is to fall behind on your repayments.

Step 5: Check for Changes

• If you meet repayment agreement under Step4, the creditor will need to delete the negative account and change it to a positive rating.
  
  Make sure you review your report for that change. You should have in your possession the creditor's agreement to correct the credit report. Contact the creditor is there is an error.
  
  Keeping Your Credit Report Clean
  
  Make it a habit to check your report regularly to protect yourself from credit abuse and fraud.
  
  You may consider credit monitoring and protection services to watch and protect your credit report:
  
  credit monitoring and protection services
  watch-guard against credit card and identity theft

Is this the right option for you:
use this option if you need help to repair your credit.

This may be the right option if circumstances such as unemployment, loss of income, or other unfortunate event prevent you from repaying your debts.

This option is also recommended if you have collection agencies threatening action. Counseling services can advice and protect you from adverse action.

• Credit counseling services:
  credit counselors will be able to discuss your situation with your debt lenders to either forgive the debt or structure a repayment plan that fits your budget.
  
  They will also work with you to establish a budget that fits your current situation.
  
  Need Debt Relief now? We can help.
  Get free, 100% online debt relief.
  Click here for more info
  
  National Foundation for Credit Counseling:
  http://www.debtadvice.org/