Recently, we have received information from our clients about a data breach in the County of San Bernardino, State of California. Here are 4 steps to take if you feel you identity information has been breached…Direct from the FTC Website
Identity Crisis… What to Do If Your Identity is Stolen
“I don’t remember opening that credit card account. And I certainly didn’t buy those items I’m being billed for.”
Maybe you never opened that account, but someone else did…someone who used your name and personal information to commit fraud. When an imposter co-opts your name, your Social Security number (SSN), your credit card number, or some other piece of your personal information for their use – in short, when someone appropriates your personal information without your knowledge – it’s a crime.
The biggest problem? You may not know your identity’s been stolen until you notice that something’s amiss: you may get bills for a credit card account you never opened; your credit report may include debts you never knew you had; a billing cycle may pass without your receiving a statement; or you may see charges on your bills that you didn’t sign for, didn’t authorize, and don’t know anything about.
First Things First
If you’re a victim of identity theft, the Federal Trade Commission (FTC), the nation’s consumer protection agency, recommends that you take the following four steps as soon as possible, and keep records of your conversations and copies of all correspondence.
1. Place a fraud alert on your credit reports, and review your reports.
Fraud alerts can help prevent an identity thief from opening any more accounts in your name. Contact the toll-free fraud number of any of the three nationwide consumer reporting companies to place a fraud alert on your credit report. You need to contact only one of the three companies to place an alert. The company you call is required to contact the other two, which will then place an alert on their versions of your report.
- TransUnion: 1-800-680-7289; www.transunion.com; Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92834-6790
- Equifax: 1-800-525-6285; www.equifax.com; P.O. Box 740241, Atlanta, GA 30374- 0241
- Experian: 1-888-EXPERIAN (397-3742); www.experian.com; P.O. Box 9554, Allen, TX 75013
Once you place the fraud alert on your file, you’re entitled to order free copies of your credit reports; if you ask, only the last four digits of your SSN will appear on your credit reports. Once you get your credit reports, review them carefully. Look for inquiries from companies you haven’t contacted; accounts you didn’t open; and debts on your accounts that you can’t explain. Check that information like your SSN, address(es), and name or initials are correct. If you find fraudulent or inaccurate information, get it removed. See the FTC’s comprehensive identity theft recovery guide, Take Charge: Fighting Back Against Identity Theft, at www.ftc.gov/idtheft to learn how. Continue to check your credit reports periodically, especially for the first year after you discover the identity theft, to make sure no new fraudulent activity has occurred.
There are two types of fraud alerts: an initial alert and an extended alert.
n An initial alert stays on your credit report for at least 90 days. You may ask that an initial fraud alert be placed on your credit report if you suspect you have been, or are about to be, a victim of identity theft.
- An initial alert is appropriate if your wallet has been stolen or if you’ve been taken in by a “phishing” scam. Phishing occurs when scam artists steal personal information from you by sending email that claims to be from a legitimate company and says you have a problem with your account. When you place an initial fraud alert on your credit report, you’re entitled to one free credit report from each of the three nationwide consumer reporting companies.
- An extended alert stays on your credit report for seven years. You can have an extended alert placed on your credit report if you’ve been a victim of identity theft and you provide the consumer reporting company with an “identity theft report.” When you place an extended alert on your credit report, you’re entitled to two free credit reports within twelve months, after placing the alert, from each of the three nationwide consumer reporting companies. In addition, the consumer reporting companies will remove your name from marketing lists for prescreened credit offers for five years unless you ask them to put your name back on the list before then.
To place either of these alerts on your credit report, or to have them removed, you will be required to provide appropriate proof of your identity, which may include your SSN, name, address, and other personal information the consumer reporting company requests.
When a business sees the alert on your credit report, they must verify your identity before issuing you credit. As part of this verification process, the business may try to contact you directly. This may cause some delays if you’re trying to obtain credit. To compensate for possible delays, you may wish to include a cell phone number, where you can be reached easily, in your alert. Remember to keep all contact information in your alert current.
The Identity Theft Report
An identity theft report may have two parts:
Part One is a copy of a report filed with a local, state, or federal law enforcement agency like your local police department, your State Attorney General, the FBI, the U.S. Secret Service, the FTC, or the U.S. Postal Inspection Service. When you file a report, provide as much information as you can about the crime, including anything you know about the dates of the identity theft, the fraudulent accounts opened, and the alleged identity thief.
Part Two of an identity theft report depends on the policies of the consumer reporting company and the information provider (the business that sent the information to the consumer reporting company). They may ask you to provide information or documentation to verify your identity theft in addition to that included in the law enforcement report. They must make their request within 15 days of receiving your law enforcement report, or, if you already have an extended fraud alert on your credit report, the date you submit your request to the credit reporting company for information blocking. The consumer reporting company and the information provider then have 15 more days to work with you to make sure your identity theft report contains everything they need. They are entitled to take five days to review any information you give them. For example, if you give them information 11 days after they request it, they do not have to make a final decision until 16 days after they asked you for that information. If you give them any information after the 15-day deadline, they can reject your identity theft report as incomplete, and you will have to resubmit it with the correct information.
Most federal and state agencies and some local police departments offer only “automated” reports – a report that does not require a face-to-face meeting with a law enforcement officer. Automated reports may be submitted online, or by telephone or mail. If you have a choice, do not use an automated report. The reason? It’s more difficult for the consumer reporting company or information provider to verify the information. Unless you are asking a consumer reporting company to place an extended fraud alert on your credit report, you probably will have to provide additional information or documentation if you use an automated report.
2. Close the accounts that you know, or believe, have been tampered with or opened fraudulently.
Call and speak with someone in the security or fraud department of each company. Follow up in writing, and include copies (NOT originals) of supporting documents. It’s important to notify credit card companies and banks in writing. Send your letters by certified mail, and request a return receipt so you can document what the company received and when. Keep a file of your correspondence and enclosures.
When you open new accounts, use new Personal Identification Numbers (PINs) and passwords. Avoid using easily available information like your mother’s maiden name, your birth date, the last four digits of your SSN or your phone number, or a series of consecutive numbers.
If the identity thief has made charges or debits to your accounts, or to fraudulently opened accounts, ask the company for the forms to dispute those transactions. Also request the transaction records relating to the identity theft, such as the fraudulent credit application.
Once you have resolved your identity theft dispute with the company, ask for a letter stating that the company has closed the disputed accounts and has discharged the fraudulent debts. This letter can help you if errors relating to this account reappear on your credit report or you are contacted again about the fraudulent debt.
3. File a report with your local police or the police in the community where the identity theft took place.
Then, get a copy of the police report or at the very least, the number of the report. It can help you deal with creditors who need proof of the crime. If the police are reluctant to take your report, ask to file a “Miscellaneous Incidents” report, or try another jurisdiction, like your state police. You also can check with your state Attorney General’s office to find out if state law requires the police to take reports for identity theft. Check the Blue Pages of your telephone directory for the phone number or check www.naag.org for a list of state Attorneys General.
4. File a complaint with the Federal Trade Commission.
By sharing your identity theft complaint with the FTC, you will provide important information that can help law enforcement officials across the nation track down identity thieves and stop them. The FTC can refer victims’ complaints to other government agencies and companies for further action, as well as investigate companies for violations of laws the agency enforces.
You can file a complaint online at www.ftc.gov/idtheft, by phone at 1-877-IDTHEFT (438-4338); TTY: 1-866-653- 4261, or by mail: Identity Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. Be sure to call the Hotline to update your complaint if you have any additional information or problems.
Next, Take Control
Although identity thieves can wreak havoc on your personal finances, there are some things you can do to take control of the situation. Here’s how to handle some of the most common forms of identity theft.
If an identity thief has stolen your mail for access to new credit cards, bank and credit card statements, pre-approved credit offers, and tax information or falsified change-of-address forms, (s)he has committed a crime. Report it to your local postal inspector.
If you discover that an identity thief has changed the billing address on an existing credit card account, close the account. When you open a new account, ask that a password be used before any inquiries or changes can be made on the account. Avoid using easily available information like your mother’s maiden name, your birth date, the last four digits of your SSN or your phone number, or a series of consecutive numbers. Avoid the same information and numbers when you create a Personal Identification Number (PIN).
If you have reason to believe that an identity thief has accessed your bank accounts, checking account, or used your ATM card, close the accounts immediately. When you open new accounts, insist on password-only access. If your checks have been stolen or misused, stop payment. If your ATM card has been lost, stolen, or otherwise compromised, cancel the card and get another with a new PIN.
If an identity thief has established new phone or wireless service in your name and is making unauthorized calls that appear to come from – and are billed to – your cellular phone, or is using your calling card and PIN, contact your service provider immediately to cancel the account and calling card. Get new accounts and new PINs.
If it appears that someone is using your SSN when applying for a job, get in touch with the Social Security Administration to verify the accuracy of your reported earnings and that your name is reported correctly. Call 1-800-772-1213 to check your Social Security Statement.
If you suspect that your name or SSN is being used by an identity thief to get a driver’s license, report it to your Department of Motor Vehicles. Also, if your state uses your SSN as your driver’s license number, ask to substitute another number.
Once resolved, most cases of identity theft stay resolved. But occasionally, some victims have recurring problems. To stay on top of the situation, continue to monitor your credit reports and read your financial account statements promptly and carefully. You may want to review your credit reports once every three months in the first year of the theft, and once a year thereafter. Stay alert for other signs of identity theft, like:
- failing to receive bills or other mail. Follow up with creditors if your bills don’t arrive on time. A missing bill could mean an identity thief has taken over your account and changed your billing address to cover his tracks.
- receiving credit cards that you didn’t apply for.
- being denied credit, or being offered less favorable credit terms, like a high interest rate, for no apparent reason.
- getting calls or letters from debt collectors or businesses about merchandise or services you didn’t buy.
Get Your Credit Report
Order a copy of your credit report from the three nationwide consumer reporting companies every year to check on their accuracy and whether they include only those debts and loans you’ve incurred. This could be very important if you’re considering a major purchase, such as a house or a car.
An amendment to the federal Fair Credit Reporting Act requires each of the major nationwide consumer reporting companies to provide you with a free copy of your credit reports, at your request, once every 12 months.
To order your free annual report from one or all of the nationwide consumer reporting companies, visit www.annualcreditreport.com, call toll-free 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is at the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They provide free annual credit reports only through www.annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
For more information, see Your Access to Free Credit Reports at ftc.gov/credit. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
Chart Your Course of Action
The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
Think you have three credit scores? You may have 50 or more
You probably know you have a credit score, and that score dictates much of your financial future. You might know you have three credit scores, thanks to aggressive advertising from companies that sell access to them.
However, those hardly scratch the surface of the collection of credit scores lenders might use to judge you. There are, most likely, dozens of scores that might control your ability to get a mortgage, buy a car or obtain insurance.
Banks often use their own scores, tweaked versions of the FICO score that began the credit score craze. Auto lenders also have their own scores. So do car insurers. And old scores, based on old formulas, are still in use by many lenders. U.S. consumers may have 50 different credit scores — or more — that could impact their ability to borrow money, and that number is rising, experts say.
“The idea of there being a one true credit score, well that’s just not accurate,” said Michael Schreiber, editor in chief at Credit.Com, a consumer advice website.
John Ulzheimer, a credit score expert who formerly worked for FICO score inventor Fair Isaac Corp., produced a detailed infographic for CreditSesame.com in September which detailed 49 different scores based on the FICO. He has found another five or six since them. And that number doesn’t include competitors like Vantage Score, invented by the credit bureaus in an attempt to cut out Fair Isaac, or other proprietary kinds of credit scores.
Getting your actual credit score is a like game of roulette at this point,” said Ulzheimer, now president of consumer education at SmartCredit.com. “Getting the wrong number can be overwhelming to a consumer. The lender is using one score but you don’t know which score.”
There are also exotic credit-based scores, such as a “revenue score,” which predicts how much interest revenue a credit card holder will generate; a bankruptcy score indicating the likelihood someone will file for legal relief of debts; and a collection score that helps debt collectors prioritize their efforts.
Credit scores were once held completely in secret by the credit industry, but are more available to the public today. Credit monitoring services include them with monthly subscriptions. Fair Isaac, the inventor of the credit score, sells FICO scores at MyFico.com. Wells Fargo gives them away to consumers who walk in and ask about new accounts. Credit.com gives away a free score to site visitors. But with more scores being invented all the time, it’s hard to say what consumers are looking at when they receive a credit score.
“It does irk people when they find out there’s a very different number they get from one scoring model to another,” said Gerri Detweiler, scoring expert at Credit.com. “People wonder, ‘What good is it to check my score if the score banks see is different?’”
If any credit score provider implies consumers are getting a comprehensive view of their creditworthiness by ordering three credit scores — based on their three credit reports at Equifax, Trans Union, and Experian — that’s misleading, Detweiler said. It’s also misleading for any firm to suggest their score is the one used by most lenders.
Ulzheimer think so, too.
“If you go to MyFico and you get a score, that is the same brand of score that lenders are using predominantly,” said Ulzheimer. “Going past that is an embellishment. … MyFico does sell you a FICO score, but it may not be the same FICO score that lenders use.”
In fact, many banks have their own scores, which sprinkle their own criteria into the complex algorithm. Car loan issuers, for example, often choose to weigh previous car loan payment history higher than other lenders, Detweiler said.
The proliferation of scores is partly the result of continuous updates to scoring formulas that are expensive for financial institutions to adopt, Ulzheimer said.
“Scores are really nothing more than generations of software,” he said. “Think of how many generations of Microsoft software are out there, for example. Every year, there’s something new that’s a little better but kind of does the same thing. Scoring systems are like that.”
For example: Last week, the group behind the Vantage scoring system announced VantageScore 3.0. It has some consumer-friendly features, such as ignoring collections accounts that have been paid off (such accounts generally lower a consumer’s FICO score), and providing exceptions for consumers who don’t pay bills because of natural disasters like Hurricane Sandy. But firms may continue to use VantageScore 2.0 for a long time.
“A large bank that didn’t want to update its systems could force providers to keep old scoring systems going for years,” Ulzheimer said.
Given the proliferation of scores, should consumers even bother trying to see one of their credit scores? Absolutely, says Detweiler. She says any score will offer a helpful reference point.
“Don’t focus so much on the number as much as what direction you are moving,” she says. “The number will give you some information about what areas of your financial life you need to work on. But if there is a drop, you will know something significant has happened.”
The number itself doesn’t matter as much as how a consumer compares to the general population, she said. Armed with this information, consumers should be able to ensure they are getting a fair interest rate when borrowing money for a home or a car or applying for a credit card. Consumers who rank near the top of a scoring scale should get a bank’s best rate.
Because she thinks consumers should track their score over time, Detweiler says it’s important to stick with the same score than trying to compare a free score doled out by a bank with another score purchased from a website.
Ulzheimer said it’s fruitless and frustrating for consumers to obsessively follow their credit scores as they pop up and down, given that lenders see different scores anyway. He recommends “managing” to your credit report instead of your credit score, since the report is at the heart of all score formulas.
“What’s constant across all scores is that doing the right thing will lead to a better score across the board,” he said. “If you pay your bills on time, your scores will go up. So worry about that. Managing to three credit reports is easier than trying to manage all those credit scores. …Consumers have to let go of that, because the number of scores will continue to get larger, not smaller.”
That’s not to suggest variations among credit scores aren’t important. In September, the Consumer Financial Protection Bureau published a study of credit scores revealing that variations among different scoring models could impact as consumer’s borrowing costs about 20 percent of the time.
The study recommended that firms that sell credit scores “should make consumers aware that the scores consumers purchase could vary, sometimes substantially, from the scores used by creditors.”
The best way to avoid paying too much for credit because of a credit score variation is to shop around. Never take the auto dealer’s word for it that they’ve gotten you the best deal on your car loan. The variations matter less with mortgages, where banks usually get three credit scores and throw out the lowest and higher score.
Detweiler said for personal sanity, consumers should avoid treating credit scores the way they treated SAT scores in high school, or grade point averages in college.
“Don’t get too hung up on a number,” she said. “You know the serenity prayer? There are some things you have control over, and some you don’t. Take care of the things you can control, like paying your bills, and the score will take care of itself.”
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OG Article here http://redtape.nbcnews.com/_news/2013/03/19/17361604-think-you-have-three-credit-scores-you-may-have-50-or-more
Here is something you need to know about opting out of those credit card offers ; aka Junkmail
How Can I Stop The Credit Card Offers?
Everyday millions of consumers get home from work to find a small stack of credit card offers in their mailbox. These offers, many of them from the same credit card issuers who sent you an offer last month, purport to offer you new credit cards. These are called “pre-approved offers of credit” and account for hundreds of millions of dollars in revenue not for the credit card issuers…but for the credit reporting agencies.
The credit reporting agencies, in addition to selling credit reports and credit scores, sell lists of consumer names and addresses to credit card issuers so they can send you those offers. The list of consumers has been “screened” by the credit reporting agencies and meets certain minimum credit score requirements. For example, a bank can buy a list of consumers who have FICO scores greater than 650, thus eliminating very risky prospective customers.
Thankfully there is a way to have your name removed from those screened lists. And, even better news, it’s free to do so. By going to this site you can have your name removed for 5 years or even permanently. But don’t worry, you can always opt back in if your mailbox starts having separation anxiety.
Opting out is easy, but giving out the amount of information you’ll be asked to give is going to be hard. You’ve got to provide your name, address, Social Security Number, Date of Birth and your phone number. They need this information to ensure the correct credit file has been “blocked” for screening purposes.
Some people don’t like the opting out idea because they can get a proxy of their credit scores by the offers they’re receiving. For example, if you’re getting Platinum style offers then you’ve got great credit scores. If you’re getting “classic” card offers with limits of “up to” $1,000 then your scores aren’t that great.
Just because you’ve opted out it doesn’t mean you’re going to stop getting offers. First off, your name is probably already on several pre-screened lists and you can’t get your name off of them after the list has been delivered to the lender. And, opting out just gets your name removed from screened lists sold by the credit bureaus. It doesn’t remove your name from other lists that are sold by other companies.
Finally, the website I sent you to is the legitimate unified “opt out” site sponsored by the national credit reporting agencies pursuant to Federal law. There are companies who, for a fee, will opt you out. Don’t get tempted into thinking you have to pay for this.
Carrying the plastic means you’re susceptible to a host of temptations and mistakes that can bring regrets later. Savvy cardholders know to resist them.
Credit cards can be a great asset or a great liability, depending on how a cardholder uses them. While you probably won’t go to hell for committing any of these sins, the financial situation you will find yourself in afterward can certainly cause some pain to your pocketbook and damage your credit score. Read on to find out the seven deadly credit mistakes you should avoid at all costs.
1. Gluttony: Bumping up against your credit limit
Just because your issuer awarded you a $6,000 credit limit doesn’t mean you should max the card out. For starters, those who aren’t able to pay off their balances in full increase the likelihood of winding up in debt, since they’ll be subject to the interest on their purchases. Secondly, bumping up against your credit limit is likely to have a negative overall impact on your credit score.
“The closer you get to your credit limit, the riskier your credit profile is going to look,” says Chris Mettler, the founder of CompareCards.com, since it leads to a high credit-to-debt utilization ratio. Mettler says it’s best to use credit in moderation, using only 15% or less of your total credit at any given time. And yes, you should also pay off all those balances in full by the end of the month whenever possible.
2. Pride: Not checking your credit report
You might assume your credit score is in fine standing based upon a presumably stellar payment history, but the truth of the matter is that credit reports can easily contain errors. And the more egregious ones, like inaccurate delinquencies or improper credit limit information, can cost you more than a few points on your accompanying credit score.
Consumers therefore should check their credit report at least once a year — especially since you’re entitled to one free copy each year, thanks to the Fair Credit Reporting Act — or right before you apply for a big loan, to minimize the chances that you’ll encounter any surprises.
3. Lust: Applying for too much credit
Lucrative sign-up bonuses can certainly be attractive, but that doesn’t mean you should apply for every credit card that’s touting one. Too many credit card inquiries — generated by lenders that are looking to see if you deserve a new line of credit — in a short time frame can also negatively affect your credit score. Instead, apply for credit as you need it, and add a new card to your payment arsenal about once a year until you’ve got three or four you can consistently pay off on time at your disposal.
4. Greed: Taking out a cash advance
It may seem like a great idea to use your credit card to get a cash advance at a casino so you have some cash to gamble with, but in addition to the lousy odds you’ll have trying to make the money grow, the paper comes with a price.
“You’re going to be charged a significant amount of interest,” Mettler says, estimating that most transactions will carry an interest rate around 23% or higher. As such, it’s best to use a credit card only in instances where the plastic itself can be used to make the purchase and you can pay back the funds by the subsequent bill’s due date.
5. Envy: Applying for a card that’s out of your league
Your globe-trotting friend may continually flash a credit card that grants access to swanky airport lounges, earns free airfare and avoids foreign transaction fees, but don’t let jealousy lead you to sign up for one of your own. Typically, cards of that caliber contain high annual fees that are worth paying only if you travel enough to justify the rewards.
Instead, ask yourself a few questions to figure out what type of credit card is more suitable to your lifestyle. (You’ll also want to check that your credit score qualifies you for the account so you don’t rack up any of the unnecessary inquiries we were talking about.) There may be a great rewards card with no annual fee that will look much better with your name on it.
6. Wrath: Closing all your credit card accounts
Those who have gotten burned by their plastic may be inclined to cut up all the credit cards in their wallet and close all the accompanying accounts, but it’s best to curb your anger. Closing accounts can negatively influence your credit-to-debt ratio, especially if the one card you’re leaving open — or transferring a balance to — is bumping up against its credit limit.
It’s better to keep the account open but not use it, since that will keep your credit-to-debt ratio positively intact and not jeopardize the average age of your credit report.
7. Sloth: Not checking your monthly credit card statements
It can be easy to set up automatic bill pay on your account and then forget all about your credit card, especially in instances where you use it infrequently. However, it’s a bad idea to skip checking your monthly credit card statements.
“You can be paying for things you’ve signed up for and forgotten about,” Mettler says, in addition to any fraudulent charges that may appear, courtesy of errors or, even worse, identity theft.
By Jeanine Skowronski, MainStreet http://money.msn.com/credit-cards/the-7-deadly-credit-card-sins-mainstreet.
I found this article and thought it was useful and relative as ever. Get your learn on as we dive into a bit of history.
The History Behind Credit Bureaus, And The Founding Of The Big Three
When you’re in the process of buying a home, looking for a new car or trying to get a credit card, one of the first things the banks or credit card companies will do is check your credit score and pull a copy of your credit report. They want to see how well you handle borrowing money, and whether or not you’re going to be worthy of receiving a new line of credit. If your credit history is bad enough you may be denied a loan, or at least be given a higher rate because you’ve shown yourself unable to handle credit very well.
Having our credit checked when we borrow money has become a fact of life these days, and we’ve all come to expect it as part of the process. But where did the credit bureaus come from, and how long have they been around?
Credit Bureaus In The 1800s
Back in the day when a merchant or business was asked to extend a credit line to an individual, all the merchant had to go on was their personal knowledge of that person, and whether or not they might be a good credit risk. As you might imagine that doesn’t always work out well if someone is new to town, has no history with local merchants, or the merchant just doesn’t know them.
As a solution to this problem as far back as the 1860s local merchants began to maintain lists of individuals who were poor credit risks, and then would share the lists with other merchants. In essence they became the first credit bureaus. By sharing information about people who were poor credit risks, they lessened their own risk and were able to offer more credit to more people.
Populations in the U.S and elsewhere began to move more freely about the country with the advent of mass transit via train and automobile, and as a result more merchants across the country needed to have information about a wider range of individuals (especially those from outside their local area). Larger regional and national credit bureaus as we know them today began to start cropping up.
Credit Bureaus: The Big Three
As the numbers of people seeking credit grew, so did the amount of data about those people – and the need to have consolidated sources of credit information for financial companies to access.
NOTE: In the U.S. there are around 2 billion data points entered every month into credit records, and there are around 1 billion credit cards actively being used.
There have been quite a few bigger national and smaller local and regional credit unions on the scene over the past century and a half, but most lenders and financial institutions now use one of the main “big three” credit bureaus. They include Equifax, TransUnion and Experian. Here’s a brief history of the big three.
Equifax – The First Of the Big Three Credit Bureaus
Back in 1899 Equifax was founded under the name of the Retail Credit Company. They quickly grew over the years to the point where they had offices all over the United States in the 1920s. By the time the 1960s arrived RCC had credit information and files on millions of Americans and would share it with just about anyone.
When the Fair Credit Reporting Act was passed in 1970 credit bureaus had limits placed on what information they could share, and with who. Up until that point it had been a bit of the wild wild west and regulators knew there had to be laws in place to govern the credit industry, as well as to protect consumers. Retail Credit Company suffered some bad PR around this time, and by 1975 they had re-branded as Equifax.
TransUnion – From Rail Equipment To Credit Reporting
TransUnion was founded in 1968 to be the holding company of Union Tank Car, a rail transportation equipment company. TransUnion became a part of the credit reporting industry in 1969 when they acquired some regional and major city credit bureaus.
They’ve continued to grow over the years and now have over 250 offices in 24 countries including the U.S.
Experian – Newcomer Of The Big Three
Experian is the new kid on the block when it comes to the Big Three. They were founded across the pond in England in 1980 as CCN Systems.
They only came to the U.S. in 1996 when they bought a company called TRW Information Services. They’ve continued expanding their credit reporting operations to grow to the point where they now have a presence in 36 countries.
Things Have Changed From The Early Days
In the early days of credit bureaus local merchants were sharing information about local residents who might be bad credit risks, and it didn’t consist of much more than a list of people who hadn’t paid off their debts.
Today credit bureaus process billions of points of data every month and monitor activity on at least a billion credit cards in the United States. Based on the myriad of data they collect they make decisions about the credit-worthiness of individuals and assign them credit scores. Consumers can also access their credit reports online these days and make disputes about the accuracy of the data held there. In the past it would have been much more difficult.
Thanks to the Fair Credit Reporting act consumers can go to the government’s website at AnnualCreditReport.com and check their credit report from each of the big three. Not only that, but there are ways to get a look at your credit score via free or paid services, so it’s easier than ever to determine how good, or bad, your credit situation is. Much easier than it would have been back in the early days of credit bureaus.
by Peter Anderson for Bible Money Matters
Here is a bit of information I found- By the Numbers
Credit-Savings-Mortgage, By The Numbers
That’s the credit score you need to qualify for the lowest interest rate on a new home or car. It makes a huge difference: On a $300,000 mortgage, someone with a score of 760 or higher could get the best rate of 3.24 percent, which works out to roughly $1,304 a month. But if your score drops 100 points, your payment will shoot up another $100. Ouch. The best ways to raise your number? Pay all your bills on time and pay down your debt–those two things make up 65 percent of your score. To make sure there are no errors dragging you down, get your credit reports annually from each of the major credit-reporting agencies (Experian, TransUnion, and Equifax) for free at annualcreditreport.com
This is the national average for credit card interest rates. If you’ve got a card in your wallet with a higher rate, pay that balance off first, because you’re getting slammed with major charges. The good news: Interest rates are generally negotiable. If you regularly pay at least the minimum on time, try haggling your way to a better rate, or consider moving the balance to your card with the lowest one–but do that only if you won’t get socked with hefty fees for the transfer.
That’s the maximum percentage of your take-home pay that should go toward housing, including mortgage payments, insurance, and property taxes. Pre-recession, many experts put the figure at 33 percent, but in this unpredictable job market, that’s too high. If you and your spouse make a combined $80,000, keep your new-home budget under $200,000. And if your housing expenses top the 25-percent mark, refinance your mortgage to lower your interest rate. You’ll feel a huge financial lift once you can truly afford the roof over your head.
That’s the amount to sock away each week in a savings account reserved for emergencies. You should have a six- to nine-month reserve in case you lose your job or face some other budget-blowing problem, but that goal can seem overwhelming. So start small with $50 a week. In one year, that’s more than $2,500 saved, which will put you ahead of many households. One recent poll found that roughly one in four Americans wouldn’t be able to come up with $2,000 in 30 days if they needed it. Start saving now.
The number of savings goals you should have. A recent University of Toronto study found that people who limit themselves to three goals under one theme–say, long-term saving–are three times more likely to say they’ll save than those who have myriad competing goals, such as retirement, a super-luxe vacation, a new home, and college funds for your kids. We say: Focus on retirement and an emergency fund, and the last one is up to you–so pick something worth it!
•Add an authorized user acct
Ask a friend/relative/business partner to add your name to one of their good credit card accts as an authorized user. This enables their good credit acct to reflect on your credit report and you automatically have their years of good paying history. This is an overnight success for your credit score. (Normally takes 30 days to get on the report.) Although it is good for score, lenders know that this is not your account and has no benefit through the lenders’ eyes.
• **Open a secured credit card account like the one above. This card is set up with no credit check. This account will take 4- 6 months to mature, but is a good way to invest in your credit. Try with your local bank to see if they offer one of these. Otherwise, go to credit cards.com click on left side column that says “cards for bad credit”. Open one of these to begin your credit history. Make sure you pick one that has the best deal for you financially, but more importantly, one that reports to all 3 credit bureaus.
• The 3rd option is something our company offers. For a fee of $495, we can have a credit account added to your report with a $5000 limit. This can only be used at an online e-books store and is set up for automatic approval.
• Whenever you add a new account to your credit report, the account needs time to age and add points to your scores. Generally, 4-6 months is that time frame.
It’s true that many companies assess a job candidate’s report before hiring, and having one that looks terrific rather than awful can work in your favor. But why would an employer pull your report in the first place?
They’d do it because they’re looking for objective insight into your character, financial responsibility and overall level of stability. After all, you may say you’re a perfectionist, but if they see a bunch of unpaid bills on your credit report, those words may not mean much.
Still, your concerns about the impact of your credit reports may be having at this stage may be unfounded, especially if you’ve yet to be invited in for a face-to-face interview.
There are many myths surrounding credit reports and employment.
Employers don’t randomly access credit reports from all job applicants. They only do so for those who are solid candidates. If they are pulling it, congratulations! They are doing a background check, and that is good news, as they are seriously considering you for the position. They won’t run it before you are a finalist. Not all occupations or industries are checking credit reports for new hires either. Most employers are looking at credit reports for people applying for positions that are clearly related to finance or have access to cash or credit. And in general, they don’t access credit reports for people applying for minimum wage jobs.
The only way an employer can pull your report is with your permission.
Do know, though, that a potential employer does not have access to the same type of reports that lenders do. The reports employers can see never include your credit scores or list your date of birth. All they can view is your credit history. In addition, these reports are considered “soft inquiries” and will not show as a “hard inquiry” to anyone else viewing your reports.
As for the real impact of your credit damage, employers are very sensitive to the fact that credit reports are not perfect. And everyone in the world knows there is a recession, and employers take that into consideration. It’s a misconception that people are being blacklisted because of their credit reports. However, if the employer makes an adverse decision based on your report, you have a right to know about it and get a copy of the report they used.
So here is the second half of the list from yesterday. Filled with nice little gems of information.
6. “It’s easier to ruin your score than improve it.”
Increasing a FICO score could be harder than lowering it. That’s partly because negative behavior, like missed payments, counts toward 35% of a consumer’s FICO score. In contrast, paying down debt helps boost a segment that accounts for 30% of the FICO score. The same is true with competitor VantageScore where payment history counts for 28% of the score while the percent of credit limit that’s used counts for 23% of the score.
FICO says score movement isn’t that clear cut. Sprauve says that borrowers can improve their FICO score through consistent positive behavior, such as paying all of their bills on time every time, keeping their balances low and only opening new credit when they need it.
Wrecking a score can also be a lot easier for a borrower with a high credit score. A borrower with a 780 score who’s 30 days behind on a payment will see their score tumble by up to 110 points, according to FICO. A borrower with a 680 score will drop by up to 80 points. The spread grows as the severity of events gets worse: In foreclosure, the 780 will fall up to 160 points while the 680 will shed up to 105 points. After filing for bankruptcy the 780 will tumble by as much as 240 points while the 680 will fall 150 points. “There’s more incentive for someone with a high score to not mess up,” says Paperno.
Sprauve says the lower score already reflects a person who is a greater risk because they have exhibited negative behavior previously. “If someone has maintained an impeccable credit history, their score is going to be hit harder the first time they trip up because statistically it is an indicator of increased risk,” he says, adding that low scores don’t stick around forever — depending on the next steps borrowers take. “They can begin to recover soon after by consistently demonstrating responsible credit management over time.”
7. “Some debts are better left unpaid than others.”
For all the talk about keeping debt to a minimum, wiping out mortgage or car loan debt might not raise a score at all. Ulzheimer says he paid off a $249,000 mortgage two years ago, which resulted in a meager four-point rise in his FICO score. In contrast, paying off all credit-card balances can boost a score by triple digits, he says, assuming no late payments or other credit problems. FICO’s Sprauve says, “Paying off the loan completely has small statistical value when predicting credit default risk.”
The rules change when borrowers are cash-strapped. If they can’t pay all their monthly bills, missing their mortgage payment could hurt their score more than missing a car or credit card payment, says Paperno. The larger the dollar amount of the past due debt, the bigger the initial hit to the credit score.
To be sure, what’s better for a credit score might not be better for borrowers. For example, advisers point out that they won’t have much time to catch up on car loans if they fall behind. Cars are being repossessed after 60 to 90 days of nonpayment.
8. “We’re sometimes wrong.”
After living in China for seven years, Lonnie Hedge returned to the U.S. last year and discovered that $8,000 in fraudulent charges were on his credit reports, and his credit score had dropped from the low-800s to the low-600s. Six months later, Hedge, a disabled veteran, says he’s still trying to clear up the error by contacting Equifax, where his score is the lowest, but has made no headway. He hasn’t been able to connect with the bureau on the phone. Even after mailing paperwork he says proves he didn’t make those charges, he says they have yet to be removed.
Daryl Toor, a spokesman for Equifax, says the bureau is focused on resolving disputes, though due to a variety of factors not often in its control, the amount of time it takes to help a consumer get resolution can vary.
Credit scores are determined by the information in consumers’ credit reports. Those reports aren’t always accurate and the repercussions can be severe: an error or fraudulent charges that are left unpaid can result in a lower credit score, which can derail borrowers’ attempts at getting credit. A report by consumer advocacy group U.S. Public Interest Research Group in 2004 found that 79% of credit reports contained an error. A separate report last year by the Policy Economic Research Council, which is funded by the credit industry, found approximately 0.5% of credit reports had material errors. The Federal Trade Commission will release its report on credit report accuracy later this year.
Debt counseling groups say they deal with errors often. “We probably see someone once a week who has something on their credit report reported incorrectly,” says Melissa Whittaker, branch manager at Augusta, Ga. nonprofit Consumer Credit Counseling Service. She says it’s often a creditor that hasn’t updated a late payment that was received, medical bills that patients assume their insurance has covered, or cases of identity theft.
This month, the Consumer Financial Protection Bureau announced plans to supervise the major credit reporting bureaus, such as Equifax, Experian and TransUnion, starting this fall. The CFPB says the move is partly in response to consumer filings about errors on credit reports.
9. “Our numbers don’t add up.”
The average FICO score — the number most lenders use to gauge a potential borrower’s credit-worthiness — stood at 690 in April, according to data released in July. That is roughly in line with both last year’s average score and the average in 2007, before the market meltdown and recession wiped out many Americans’ wealth.
Many credit pros say that data doesn’t make sense. Since 2007, nearly nine million homes have gone into foreclosure and over six million people have filed for personal bankruptcy — events that typically send FICO scores tumbling. Borrowers who previously had high FICO scores (above 750) may see their scores drop by more than 200 points in such events, says Ulzheimer. “Something stunning isn’t showing up in the data,” says Anthony Sanders, a professor of finance at George Mason University, who studies credit scores.
FICO defends its calculations. There are roughly 200 million U.S. consumers with a FICO score, so in order for the average score to change more noticeably, a much larger number of consumers on one end need to be affected, says Anthony Sprauve, a spokesman for myFICO.com, the consumer division of FICO. In addition, over the past several years, even though the average has stayed roughly the same, more consumers have moved away from the middle in both directions, Sprauve says. There are “two opposing forces at play,” Sprauve says.
10. “You can game the system.”
For years, financial planners have told their clients to pay off their debts before signing up for a mortgage. With less debt, they’ll have a better shot at having a higher credit score, which would in turn lead to a lower interest rate on their home loan. But just how much a certain action would boost their score was unknown to the consumer until after they actually implemented it.
Much of that mystery is gone now. A credit management software company in Baltimore, Md., called CreditXpert offers a simulator where consumers can plug in their credit information and run what-if tests, like paying down debt on one credit card or paying off a student loan to see to what degree each action could impact their credit score. David Chung, managing director of CreditXpert, says mortgage loan officers and brokers are using this system to help their clients. After reviewing an applicant’s credit scores, they run theoretical scenarios on CreditXpert’s simulator to see if paying down a certain debt (or another action) will raise a borrower’s credit score enough to qualify for a lower rate.
The incentive for the mortgage officers, he says, is to close the loan rather than lose it to a competitor, and to possibly gain referrals from satisfied customers. Donnelly, of the Mortgage Bankers Association of Washington, D.C., says some lenders don’t encourage their loan officers to use this since it could be seen as gaming the system. FICO’s Sprauve says the only simulator that’s based on the FICO scoring model is on its web site.
By ANNAMARIA ANDRIOTIS