Wonder how your credit report is created? Sometimes it’s best not to know how the sausage is made, but in this case some extra knowledge may be enlightening.
John Ulzheimer, a credit expert, worked with the Web site Credit Sesame to create a graphic map showing how various types of information make their way — or not — into your credit report.
In most cases, Mr. Ulzheimer said, the credit bureaus — like Equifax, Experian and Transunion — receive information from institutions where you have accounts, like credit card issuers or home loans or student loan lenders. In industry lingo, these are known as “trade” or “tradeline” accounts, he said.
Those accounts make up the bulk of the information in your credit report. Institutions provide the data under agreement with the bureaus, in exchange for access to credit files so they can evaluate the creditworthiness of applicants. Institutions aren’t legally required to report credit information — but if they don’t, they lose the benefit of having access to credit reports.
When credit bureaus get customer data, he said, they generally audit it before posting it to your credit file, to help avoid errors and disputes. A batch of data with an unusually high proportion of delinquencies, for instance, might be sent back for double-checking.
When lenders seek your credit report in response to an application for a credit card or a loan, it shows up as a “hard” inquiry. Too many such inquiries may cause your credit score, which is based on information in your credit report, to dip.
Some inquiries don’t affect your score, however. They include requests made as a result of applying for insurance or for service from a utility company, Mr. Ulzheimer said, and requests you make yourself for a copy of your credit report.
Some public records, like bankruptcy filings or federal tax liens, usually appear on your credit reports because the credit bureaus have electronic access to federal courts through the Pacer document system. But civil judgments filed with state and county courts may or may not show up on your report, since not all of those courts make such information available electronically. Credit bureaus may be able to find the information through database services, but its appearance in credit files is generally less consistent than legal information generated by federal courts. (In other words, you may get lucky.)
Have you ever had a legal judgment appear on your credit report? What impact did it have?
By ANN CARRNS
For Credit Sesame
Ask the Expert: Does Opting Out of Credit Card Offers Improve Credit Scores?
September 16, 2013 by John Ulzheimer
The world of consumer credit is loaded with myths, some more stubborn to debunk than others. Credit scores are used by employers, you build credit faster by carrying credit card balances, credit scores reward you for being in debt, opting out will improve your credit scores. None of these things are actually true and it’s the last myth that I’ll address today.
What is opting out?
Today when you get home from work or school and check your mail you’ll likely find one or more credit card offers from credit card issuers. Those offers are likely of the “preapproved” variety, which means the credit card issuer has actually determined that they are willing to offer you a credit card even though you never asked for one.
The credit card issuer purchased your name, along with many others, from one of the credit reporting agencies through a process called “prescreening.” Prescreening is the process whereby the card issuer gives the credit bureau a list of criteria and wants a list of consumer names and addresses that meet that criteria.
So, for example, I might ask one of the credit bureaus to provide me with list of 1,000,000 names and addresses belonging to consumers who live in the metro Atlanta area who have VantageScore credit scores above 725, don’t have any late payments in the past 24 months, and don’t have more than $10,000 of credit card debt. This is called “selection criteria.” Of course, the credit bureaus have to tap into their credit file database in order determine who meets this criteria.
If the credit card issuer acquires your name and address using this method then they have to make you what’s referred to as a “firm offer of credit or insurance.” This is normally done by sending you a credit card offer in the mail saying that you’ve been pre-approved for some amount of credit. All of this will result in a “promotional” inquiry being posted on your credit report.
The Fair Credit Reporting Act gives consumers the ability to prevent the credit bureaus from selling their names to lenders through a process called “Opting Out.” You can do this for free at www.optoutprescreen.com. You can opt out forever or for a shorter amount of time. After a few months you’ll stop getting preapproved credit card offers in the mail.
The opting out myth
Some people suggest that you will improve your credit scores by opting out. The problem is that it’s not true. Opting out has no impact, at all, on your credit scores.
The only direct influence opting out has on your credit reports is to prevent new promotional inquiries from being added. But, promotional inquiries are of the “soft” variety and they have no impact on your credit scores anyway so preventing them doesn’t do anything for your scores.
Advantages to opting out
That certainly doesn’t mean there’s no value to opting out. You’ll certainly reduce or fully eliminate credit card offers, which means less mail to throw away or shred. And, because those credit card offers can be used by credit card fraudsters to open new cards in your name opting out can help to minimize your risk of credit card identity theft. But, that’s where the value ends.
Original article here: http://www.creditsesame.com/blog/ask-the-expert-does-opting-out-of-credit-card-offers-improve-credit-scores/
Trying to fix a mistake in your credit report by providing a detailed set of documents to credit bureaus could be a waste of time.
The Consumer Financial Protection Bureau, in a report released (in 2013), suggested that the three major credit-reporting firms–Equifax Inc. EFX -0.69% , TransUnion LLC UK:EXPN +1.60% and Experian PLC –may not be giving adequate consideration to information submitted by consumers disputing their credit reports.
Federal law requires credit-reporting firms to send suppliers of consumer data — including credit-card companies, banks and collection agencies — notice that includes “all relevant information” supplied by the consumer.
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But rather than pass along documents, the industry uses a computerized coding system to describe the complaint. The big three credit-reporting firms “generally do not forward documentation that consumers submit with mailed disputes or provide a mechanism for consumers to forward supporting documents when filing disputes online or via phone,” the report said. See the full report.
For example, if a consumer has evidence that a debt has been paid off, the credit bureau may not pass along that information to his or her credit-card company or a debt collector.
Norm Magnuson, a spokesman for the Consumer Data Industry Association, which represents credit-reporting firms, said the industry’s system is adequate and handles a huge volume of complaints quickly and efficiently.
“The lenders are getting all the information they need to resolve the dispute in a timely manner,” he said.
An industry-funded study from last year that found that 95% of consumers were satisfied with the dispute-resolution process, Magnuson said. Representatives of Equifax, TransUnion and Experian either declined to comment or couldn’t be reached for comment.
The report didn’t come to any conclusions about whether the credit bureaus are out of compliance with this piece of the law.
The consumer bureau found that credit-reporting firms resolve 15% of complains on their own, passing along 85% to the financial institutions that provide reports on consumer activities, known in the industry as “data furnishers.”
Credit reports are used by lenders to evaluate potential borrowers for home loans, auto loans and credit cards. Earlier this year, the consumer bureau began overseeing the industry, and plans to evaluate whether the firms are providing accurate consumer information, handling consumer disputes appropriately and preventing fraud.
The consumer bureau’s report “sheds light on a process that’s tilted against the consumer,” said John Ulzheimer, president of consumer education at SmartCredit.com, a credit-monitoring site.
The CFPB report also found that fewer than one in five consumers get copies of their credit report every year.
By Alan Zibel http://www.marketwatch.com/story/why-credit-bureaus-fail-to-fix-errors-2012-12-13
6 More Credit Myths Debunked
I know what you’re thinking, didn’t you already send out an article like this? Yes, I did. But this list is different. Here are 6 new Myths that are uncovered for you:
Myth #1: FICO, the company, calculates your FICO scores
In order for your FICO score, or any of your credit scores, to be calculated two things have to be married; your credit report and a scoring model. FICO, the company, does not maintain your credit reports. As such, FICO cannot calculate your FICO scores. The FICO scoring software is installed at Equifax, Experian and TransUnion. This gives the credit reporting agencies the two things needed to calculate a FICO score. That means your FICO scores are calculated and delivered to lenders by the credit bureaus.
Myth #2: The credit bureaus grant or deny credit applications
Believe it or not, this is a pretty common myth. It’s so common that Federal law requires lenders who have denied your credit application to communicate with you that the credit bureaus had nothing to do with their decision. The credit bureaus simply provide lenders with your credit reports and credit scores. That’s where their involvement with the loan approval (or denial) process ends. If you’ve been denied, it was the lender that denied you. You can plug FICO into this myth as well, as they also have nothing to do with the approval or denial process.
Myth #3: Equifax, Experian and TransUnion are credit rating agencies
These companies are legally defined as “Consumer Reporting Agencies” and more commonly referred to as credit bureaus or credit reporting agencies. Credit rating agencies are companies like Moody’s, Standard and Poor’s or Fitch Ratings. They’re the guys who assign letter grades to certain types of debt obligations. Sometimes, FICO gets lumped in with the credit bureaus and the incorrect designation of a credit rating agency.
Myth #4: Credit reports and credit scores are the same thing
This myth is so prevalent that it has lead to the most common misunderstanding relative to credit scores, which is that they’re used for employment screening. Think of credit reports as a car and credit scores as the stereo upgrade that doesn’t come standard with the car. A credit score is a product sold along with credit reports, just not to employers. The interchangeable use of the terms is improper.
Myth #5: FICO is a credit reporting agency
FICO is a lot of things, but none of those things is a credit reporting agency. The credit reporting agencies gather, maintain, and sell credit-related information to lenders, insurance companies, consumers and other parties. FICO does not have a credit file database. They’re an analytics company.
Myth #6: A charge card and a credit card are the same thing
The only thing similar between charge cards and credit cards is that they’re both made of plastic and you can buy stuff with them. A credit card allows you to roll or “revolve” a portion of your existing balance to the next month, a process that will result in the assessment of interest. A charge card is a “pay in full” product, in that you have to pay off the balance, in full, every month.
Charge cards almost always have annual fees, which help the issuer to make money in the absence of interest. Credit cards generally rely on interest and fees for their financial contribution to the issuer’s bottom line. Charge cards are not nearly as common as credit cards but they’re a pretty decent option if you want the convenience of plastic without the possibility of getting deep into debt.
By; John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.
Credit repair, done right, can do wonders for your credit report and your scores too! Here are a few tricks of the credit repair trade that will really make your scores move fast. Put them to work individually, or all at once, depending on your own needs, and watch the magic happen.
1) Open Accounts Right Now!!!
The FICO scoring model will give you bonus points for opening new accounts after a period of bad credit. It is all in the timing. Those old cards that survived the tough times are still worth something, but when it comes to credit repair FICO wants you to prove that you still have what it takes to get back in the swing of borrowing money. If your credit is crummy, secured credit cards are ideal. Small is good! Open now, pay on time, keep your balances low, and your scores may rise over 100 points in the next six months.
2) The Balance-Limit Connection
This credit repair tip is just as urgent for those opening new accounts today as it is for those managing already well seasoned revolving accounts. A little change in your balances can send your credit scores flying or diving. Have you maxed out a card lately and then checked out your scores? This is a fairly recent FICO tweak which can work for or against you. Try to use less than 30 percent of your limit for the best result.
3) Take a Look!
Have you seen you credit report lately? If not, why not??? There may be errors lurking and a simple dispute or challenge to the credit bureaus may be all it will take to get your scores back on track. Not sure how to check your report or how to dispute? Contact a professional right away. Good luck!
By Cesar Marrufo
ELITE FINANCIAL, LLC.com
Consumer Protection Through Education.
Here is some sound advice on what to do if you feel your credit card has been tampered with. Recent security breach teaches us all a lesson.
New to the US? How can you build credit?
Dear Credit Card Adviser,
My son and his family recently moved to the U.S. after living abroad for 11 years. His wife does not have a Social Security number. Can she qualify for a credit card? Are there other actions she can take to boost her credit history?
This is a trickier question than it seems, with many parts. Let’s start with your son’s wife, or your daughter-in-law, and discuss how to get her a credit card.
Depending on the creditor, she may or may not need a Social Security number to apply for a credit card. Capital One and Chase require this number on their credit card applications. Discover and Bank of America accept Social Security numbers, but they also will take a taxpayer identification number issued by the Internal Revenue Service.
American Express accepts several forms of identification: Social Security, taxpayer ID, a foreign driver’s license or a foreign-issued passport. Citi doesn’t require a Social Security number, but applicants who don’t have one may be asked to show a government-issued ID at the closest Citi bank branch.
Your daughter-in-law also can be added as an authorized user on many credit cards without an SSN.
Now, let’s look at her credit history. Unfortunately, your daughter-in-law’s foreign credit history can’t be transferred to the U.S. But she can start building one here even though she doesn’t have a Social Security number. It’s best to have one, though, to ensure her credit information is recorded accurately, says Maxine Sweet, vice president of public education at Experian.
“Name and current address are the minimum requirement, but we strongly encourage the lender to provide the SSN, date of birth and previous address if it was within the last two years,” she says. “That additional information can be very important in helping us match the account to the correct consumer.”
TransUnion also builds credit histories on individuals without a Social Security number. Equifax didn’t respond to emails asking about their minimum identification requirements for a credit report.
Getting a Social Security number isn’t easy. Generally, only immigrants OK’d to work in the country by the Department of Homeland Security qualify for an SSN, according to the Social Security Administration website. There are exceptions, so contact the agency for more information.
Now, here’s a potential problem you probably didn’t anticipate: Your son may have a hard time getting a credit card, too. If your son didn’t maintain any open or active U.S.-based credit — such as a mortgage, credit card or other loan — while he was abroad, a lender probably won’t be able to pull his credit score. He may not even have a U.S. credit file anymore.
A U.S. credit report from Experian, Equifax and TransUnion is based on payment history on mortgages, car loans, student loans, personal loans, credit cards and other loans he got here. If he doesn’t have any activity on these types of accounts in the past year or so, his credit report has gone stale, says John Ulzheimer, president of consumer education at SmartCredit.com.
“At that point, the credit report will cease to be scoreable under any credit score criteria,” he explains. Credit scoring models need recent activity to calculate a credit score. No activity, no credit score. No credit score, no new credit in most cases.
That’s not all. The credit reporting agencies don’t maintain credit files indefinitely. By law, negative credit information must fall off credit reports after seven years. Bankruptcies disappear after 10 years. Sounds good, right? But Ulzheimer says credit reporting agencies will eventually drop the good stuff, too. After 11 years, your son’s credit history may have vanished.
Your son should see if he has a credit report. If he does, he should give it a thorough read and make sure there aren’t any errors. He can pull his credit reports from each of the bureaus for free once every 12 months at AnnualCreditReport.com. If he finds he has little or no credit history, he will need to start building credit again the same way a young adult does: through a secured credit card or as an authorized user.
Secured credit cards require an upfront deposit to act as collateral against the line of credit. The deposit equals the credit limit, and it’s placed in a money market account or certificate of deposit while the account is open. Typical deposits run between $300 and $500. The problem is that you need at least six months’ worth of activity on the card before a FICO credit score — the most widely used score out there — can be created.
This is where you, as a parent, can help out, if you have good credit history. Adding your son (and daughter-in-law) as an authorized user on a credit card (or two) will immediately populate his credit file with the card’s payment history. That means he’ll have a calculable credit score, too. He’ll be able to apply for credit in his own name and build from there. Good luck to the whole family!
By Janna Herron | Bankrate.com
FICO Scores are calculated from a wide variety of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages reflect how important each of the categories is in determining your score. These percentages are based on the importance of the five categories for the general population. The importance of these categories may vary for particular groups – for example, people who have not been using credit long might find less importance on amounts owed and greater importance on payment history. Paying your bills on time and paying down account balances are the top two factors that can help or hurt your credit score regardless of who you are and what your credit situation is! Here’s a breakdown of how your credit score is calculated:
• 10 % Types of Credit Used
• 10% New Credit
• 15% Length of Credit History
• 30% Amounts Owed
• 35% Payment History
Knowing and more importantly understanding these figures can help a great amount towards getting your credit score back on track. Follow us on Twitter and Facebook.
Will a wage garnishment affect your credit score?
A wage garnishment, which results after a court order says a lender can obtain money a borrower owes by going through the borrower’s employer, won’t show up on your credit report and therefore, won’t impact your credit score.
“Garnishments do not have a direct impact on your credit scores because they are not picked up by the credit bureaus and placed on credit files,” John Ulzheimer, president of consumer education for SmartCredit.com, tells MainStreet.
An Experian spokesperson also confirmed with MainStreet that the credit bureau does not receive information about wage garnishments.
“Although garnishment proceedings are a matter of public court record, they are not reported on Equifax consumer credit files,” a spokesperson from Equifax also told MainStreet.
But that doesn’t mean it won’t send up a red flag to lenders that you can’t pay back your debts and shouldn’t qualify for a loan.
“Garnishments aren’t a secret to prospective lenders,” Ulzheimer says. “Applications for things like mortgages will usually ask for obligations and liabilities, and you’ll have to disclose the fact that your wages are being garnished.”
This is part 2 in a series of videos on basics of credit, that is Credit 101. What is a credit score? How do we explain the algorithm that makes up a credit score or FICO score? This is something that should be taught in high school. A brief explanation of credit scores. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California (Moreno Valley). Learn how to fix your bad credit report and position yourself to purchase a home.