Creditors keep their evaluation
making it difficult to know just how to improve your credit
Nonetheless, it is still important to understand the factors
that determine creditworthiness. Periodically reviewing
your credit report can also help you protect your credit
rating from fraud - and you from identity theft.
CREDIT EVALUATION FACTORS
Many factors are used in determining credit decisions. Here
are some of them:
- Payment history/late payments
- Charge-offs (Forgiven debt)
- Closed accounts and inactive accounts
- Recent loans
- Cosigning an account
- Credit limits
- Credit reports
- Debt / Income ratios
OBTAINING YOUR CREDIT REPORTS
Credit reports are records of consumers' bill-paying habits,
but do not include FICO credit scores. Also referred to as
credit records, credit files, and credit histories, they are
collected, stored, and sold by three credit bureaus, Experian,
Equifax, and TransUnion.
The Fair Credit Reporting Act (FCRA) requires 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.
You can check your
credit report three times a year for free by requesting a
credit report from a different agency every four months.
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 six months.
UNDERSTANDING YOUR CREDIT REPORT
Credit reports contain symbols and codes that are abstract to
the average consumer. 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 extremely 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
In light of numerous credit card and other breaches, it is
recommended that you conduct 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.
The Fair Credit Reporting Act (FCRA) protects consumers in the
case of inaccurate or incomplete information in credit files.
The FCRA requires credit bureaus to investigate and correct
any errors in your file.
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 about thirty 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.
If you need help obtaining your credit reports don't hesitate
to call one of the 3 credit bureaus, Experian, Equifax, or
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