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Credit Scores and Reports

What You Should Know

How do lenders determine who is approved for a credit card, mortgage or car loan? Why are some individuals flooded with credit card offers, while others get turned down routinely? Because creditors keep their evaluation standards secret, it’s difficult to know how to improve your credit rating. It is important, however, to understand the factors and to review your credit report periodically for any irregularities, omissions or errors. Reviewing your credit report annually can help protect your credit rating from fraud and ensure its accuracy.

Credit Evaluation Factors

Many factors determine your credit. Here are some of the major factors considered:

  • Age
  • Residence
  • "Authorized user" payment history
  • Checking and savings accounts
  • Bankruptcy
  • Charge-offs (forgiven debt)
  • Child support
  • Closed accounts and inactive accounts
  • Jobs
  • Payment history
  • Recent loans
  • Collection accounts and charge-offs
  • Cosigning an account
  • Credit limits
  • Debt/income ratios
  • Department store accounts
  • Payment history/late payments
  • Finance company credit cards
  • Income/income per dependent
  • Mortgages
  • Revolving credit
  • Name/alias
  • Number of credit accounts
  • Fraud
  • Inquiries

These factors may be used and weighted in determining credit decisions. Credit reports contain much of this information.

Obtaining Your Credit Reports

Credit reports are records of consumers' bill-paying habits. Credit reports are also called credit records, credit files and credit histories, and are collected, stored and sold by credit bureaus, the three largest being Experian, Equifax and TransUnion.

Recent changes to the Fair Credit Reporting Act (FCRA) require that each of the three credit bureaus provide you with a free copy of your credit report, at your request, every 12 months.

If you have been denied credit or believe you've been denied employment or insurance because of your credit report, you can request that the credit bureau involved provide you with a free copy of your credit report, but you must request it within 60 days of receiving the notification.

Disputing Errors in Your Credit File

The Fair Credit Reporting Act (FCRA) protects consumers in cases of inaccurate or incomplete information in credit files. The FCRA requires credit bureaus to investigate and correct any errors in your file.

Tip: If you find any incorrect or incomplete information in your file, write to the credit bureau and ask them to investigate the information. Under the FCRA, they have 30 days to contact the creditor and find out whether the information is correct. If not, it will be deleted.

Be aware that credit bureaus are not obligated to include all of your credit accounts in your report. If, for example, the credit union that holds your credit card account is not a paying subscriber of the credit bureau, the bureau is not obligated to add that reference to your file. Some may do so, however, for a small fee.

Fair Credit Reporting Act (FCRA)

This federal law was passed in 1970 to give consumers easier access to, and more information about, their credit files. The FCRA gives you the right to find out the information in your credit file, to dispute information you believe inaccurate or incomplete, and to find out who has seen your credit report in the past 6 months.

Understanding Your Credit Report

Credit reports contain symbols and codes that can be confusing. Every credit bureau report also includes a key that explains each code. Some of these keys decipher the information, but others just cause more confusion.

Read your report carefully, making a note of anything you do not understand. The credit bureau is required by law to provide trained personnel to explain it to you. If accounts are identified by code number, or if there is a creditor listed on the report that you do not recognize, ask the credit bureau to supply you with the name and location of the creditor so you can ascertain if you do indeed hold an account with that creditor.

If the report includes accounts that you do not believe are yours, it is important to find out why they are listed on your report. It is possible they are the accounts of a relative or someone with a name similar to yours. Less likely, but more importantly, someone may have used your credit information to apply for credit in your name. This type of fraud can cause a great deal of damage to your credit report, so investigate the unknown account as thoroughly as possible.

We recommend an annual review of your credit report. It is vital that you understand every piece of information on your credit report so that you can identify possible errors or omissions.

If you need help obtaining your credit reports or need assistance in understanding what your credit report means, give us a call <LINK: /contact-us>.

Paying Off Debt the Smart Way

Between mortgages, car loans, credit cards and student loans, most people are in debt. Being debt-free is a great goal, but you should focus on the management of debt, not just getting rid of it. It will likely be there for most of your life, and handled wisely, it won't be a burden for you.

You don't need to shell out your hard-earned money for exorbitant interest, or always feel like you're on the verge of bankruptcy. You can pay off debt the smart way, while at the same time saving money to pay it off faster.

Know Where You Are

First, assess the depth of your debt. Write it down, use a spreadsheet like Microsoft Excel, or a bookkeeping program like our free Money Management inside Online Banking, or Quicken. Include every financial situation where a company has given you something in advance of payment, including your mortgage, car payment(s), credit cards, tax liens, student loans, and payments on electronics or other household items.

Record the day the debt began and when it will end (if possible), the interest rate you're paying, and what your payments typically are. Add it all up, as painful as that might be. Try not to be discouraged. Remember, you're going to break this down into manageable chunks while finding extra money to help pay it down.

Identify High-Cost Debt

Yes, some debts are more expensive than others. Unless you're getting payday loans (which you shouldn't be), the worst offenders are probably your credit cards. Here's how to deal with them.

  • Don't use them. Don't cut them up, but put them in a drawer and only access them in an emergency.
  • Identify the card with the highest interest and pay off as much as you can every month. Pay minimums on the others. When that one's paid off, work on the card with the next highest rate.
  • Don't close existing cards or open any new ones. This can actually hurt your credit rating.
  • Pay on time, absolutely every time. One late payment these days can lower your credit score.
  • Go over your credit-card statements with a fine-tooth comb. Are you still being charged for that travel club you've never used? Look for line items you don't need.
  • Call your credit card companies, and ask them nicely if they would lower your interest rates. Sometimes it works!

Save, Save, Save

Do whatever you can to retire debt. Consider taking a second job and using that income only for higher payments on your financial obligations. Substitute high-cost family activities for lower-cost alternatives. Sell high-value items that you can live without.

Do Away with Unnecessary Items to Reduce Debt

Do you really need the 800-channel cable option or that dish on your roof? You'll be surprised at what you don't miss. How about magazine subscriptions? They're not terribly expensive, but every penny counts. It's nice to have a library of books, but consider visiting the public library or half-price bookstores until your debt is under control.

Never, Ever Miss a Payment

Not only are you retiring debt, but you're also building a stellar credit rating. If you ever move or buy another car, you'll want to get the lowest rate possible. A blemish-free payment record will help with that. Besides, credit card companies can be quick to raise interest rates, because of one late payment. A completely missed one is even more serious.

Do Not Increase Debt Load

If you don't have the cash for it, you probably don't need it. You'll feel better about what you do have if you know it's owned free and clear.

Shop Wisely, and Use the Savings to Pay Down Your Debt

If your family is large enough to warrant it, invest $30 or $40 and join a store like Sam's or Costco. And use it. Shop there first, then at the grocery store. Change brands if you must. Use coupons, calculate the money you're saving, and slap it on your debt.

Each of these steps alone, probably doesn't seem like much. But if you adopt as many as you can, you'll watch your debt decrease every month.