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Credit Reporting Articles

Did You Know You Can Freeze Your Credit?

April 5, 2010 | Credit Reporting | No Comments

If you want to protect your credit for fear of identity theft or you are a recent victim of identify theft credit freeze is a good way to immediately protect yourself. In a sense, this is like putting a padlock on your credit profile to protect your identity.

A credit freeze, or security freeze, can be requested by each of the 3 credit bureaus (Equifax, Transunion and Experian) to seal your credit report making your credit report inaccessible, unless you give authorization with a password or personal ID number.

However, keep in mind that a security freeze may delay, prohibit or interfere with timely approval of request or application you make regarding a mortgage, insurance, new loan, insurance, government services or payments, rental housing, employment, etc.

Each of the credit bureaus charge from $3 to $10 to place a freeze on your credit report.  However, if you are a recent victim of identify theft; you may be able to get a credit freeze at no cost.  Costs vary by state, so check your state’s guidelines.

A credit freeze does not hurt your credit.  It is a method to protect someone from accessing your credit report unless you give permission.

Removing a credit freeze varies for each bureau, but you typically have 2 options.  You can temporarily remove the credit freeze (or thaw) or permanently remove it.  A temporary lift, typically lasting 7, 15, or 30 days, is used when you need a third party to access your credit.  Of course, a permanent lift means your want your credit information available to anyone without restrictions.  There maybe a cost with lifting your credit, again check with your state’s guidelines.

Below are links to the 3 credit bureaus for more information about credit freeze:

Experian

 

Equifax

 

TransUnion

Review Your Credit Report First Before Applying for a Loan

October 27, 2009 | Credit Reporting | No Comments
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If you are applying for a loan, obtaining a copy of your credit report is the first place you should start.  Your credit report more than likely is the first thing a potential creditor will look it.  Even if you pay your bills on time and have a good credit score you want to ensure that all the information in your credit report is accurate and up-to-date.

Studies have shown that many credit reports contain inaccurate information what could affect your credit rating and even cause your loan application to be rejected.  If you discover a problem, you can fix it before potential creditors access it.  

You can get a free copy of your credit report from AnnualCreditReport.com. You are entitled to 1 free credit report within a 12-month period from each of the three agencies.   This free credit report doesn’t show your score, but will show items listed on your credit report.  To get your score you will have to purchase your credit report from services such as Equifax.

Before applying for a loan, check your credit report for the following items:

Clerical Errors
Credit reports sometimes contain errors that are a result of clerical (human) error or a computer glitch.  These may include late payments, payments not credited, or data mixed in from a credit file of someone with your similar name.  

Excess Unused Credit

The fewer charge accounts you have the more attractive you are to a potential lender.  You may want to consider reducing the number of revolving charge accounts listed as active in your credit report.  Lenders sometimes view too many revolving debt as a negative when considering a loan application.

Inactive Accounts
If you have accounts you have stopped using, it’s a good idea to close these accounts if you don’t plan on ever using them.  When you close an account, make sure your creditor notes the account as “closed at consumer’s request”; otherwise, a potential lender might assume the creditor closed the account for other reasons.

Credit Card Accounts
Well managed credit cards may improve your chances of getting a loan at a good rate, especially a mortgage loan, where lenders use stricter qualifying guidelines.  It’s also advised to keep credit card balances around 75% of the available credit limit.  Ironically, credit cards with high credit limits are viewed as potential debt, while maxed-out cards make consumers less desirable credit risk.  Both of these scenarios could limit your ability to get a loan.

30-day and 60-day Late Payments
If your credit report contain a couple 30-day late payments entries that are accurate, lender may over look the occasional late payment if you explain the situation and your credit score is good.  Try to avoid late payments over 60 days because it will raise a red flag to some lenders.  Even if you obtain the loan, it may come with a higher interest rate and will less favorable terms.

Most lenders are interested in the last two years of data on your credit report.  Therefore it’s a good idea to maintain on time payments and verify that the payments are credited properly on your credit report.

Avoid Unnecessary Inquiries
Every time your credit report is accessed by a creditor it is noted on your credit report.  Most inquiries stay on your credit report for up to 2 years.  Inquiries made by you, for drug screening, pre-approved credit offers, background checks for employment are not reported on your credit report.

Excessive inquiries may cause lenders to think you are trying to get credit due to financial difficulty or you are taking on more debt than you can repay.  However, lenders do realize that some inquiries are a result of shopping around for the best loans and will overlook a block of inquires within a recent period.
 
The key to smart credit management is to fully understand how your credit report affects your financial future.  Reviewing your credit report is a vital part of financial planning and is one of the best ways to ensure you meet your financial goals especially when it involves major purchases.  Unknown inaccuracies on your credit report could cost you hundreds or thousands of dollars in the long run because creditors my grant you loans with higher interest rates and stricter guidelines.

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What Lenders Look for In Your Credit Report

September 16, 2009 | Credit Reporting | No Comments
review-credit-report

Whenever you apply for a loan, the lender will evaluate your credit risk by trying to determine the likelihood you will make payments on time and pay off the loan.  There are various things that they look at on your credit report to determine this.

Number of Inquiries
Lenders look at the number of “soft” and “hard” inquiries into your credit report.  Soft inquires are made when an existing lender or you check your credit report.  Hard inquires are made when you apply for a loan and will affect your credit score.  The fewer hard inquires you have the better.  If you are shopping around for a loan, consider doing it in a 14 day window because all inquires will count as only one.

Different Type of Credit
Lenders will look at your open credit accounts, accounts closed up to 10 years ago, amount owed and the initial or limit loan amount.  Lenders want to see that you can handle different types of credit.  A long history of handling debt will help your credit score so it’s a good idea to keep your oldest credit cards open and active.

Paying Your Bills On time
Lenders will look at your payment history to determine if you pay your bills on time.  The more times you are late paying your bills will be less appealing to a lender.  If you have one or two late payments with an existing lender, you may want to ask for a good-will adjustment to remove them.

How Much Credit You are Using

Lenders will look at how much you owe on credit cards relative to your limit.  Creditors usually report this information to the credit bureaus the day the billing cycle closes.  You should always use less than 20% of your available credit.

Serious Credit Problems
Lenders will look closely at any liens, delinquent accounts, foreclosures and bankruptcies on your credit report.  Keep in mind these problems will show up on your credit report for 7 to 10 years.   However, you can add a personal statement to your credit report if something needs explaining.  This may help your case if applying for a loan.

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Get Your Free Credit Report and Score at Quizzle.com

May 26, 2009 | Credit Reporting | 5 Comments
quizzledotcom-beta-logo

Ann-Marie left a comment for the Article “Get Your Free Credit Score from Credit Karma” to check out Quizzle.com if you are shy about entering your Social Security Number to get your free credit score.  She stated that Quizzle.com gives you a free Experian credit report and future scores every six months. 

As a result, I decided to check it out. The first thing I noticed is that Quizzle.com is owned and powered by the reputable Quicken Loans.  The site is authenticated by VeriSign Trust Network.  The site also begins with https which ensures information is encrypted using SSL before transmission. So I felt Quizzle.com was a legitimate and secure Website.

Ann-Marie is correct that you don’t have to give your Social Security Number.  While signing up, you are asked to pick from a list of past phone numbers, past cities you lived in, past employers, etc.  I assume this is how Quizzle.com verifies that you are the right person.  However, if someone knows you very well they will be able to easily answer these questions and get your credit score. This may cause some privacy issue concerns.

Regardless, Quizzle.com did give me free credit score from Experian, as well as a grade for my home, my budget, my mortgage and my rainy day fund.  Overall I scored 86 out 100.  See screen shot below.

quizzle-screenshot3

Credit Report
In addition to receiving a credit score, Quizzle.com gives you the credit report as well, highlighting open accounts, closed accounts, negative accounts, public records and credit inquiries, which in my case were mostly accurate.  I do have to find out why a collection company is listed under my negative accounts.

Home Value Report
The rating on my home value was based on comparable home sales in my neighborhood.  The four homes listed were recently sold in my neighborhood were all foreclosures which were deeply discounted compared to when I purchased my home.  According to Quizzle.com, my home has depreciated by 6.6% on average each year since purchase and was rated a F.  Ouch!

Mortgage Report
My mortgage grade is a B (82%). Because of my home value, Quizzle.com was unable to provide me with online mortgage recommendations.  I’m certain this is where Quicken Loan would have played an important part.  However, I can adjust the numbers and recalculate or check back later to see if they have new options to offer.

Budget and Rainy Day Fund Reports
Quizzle.com also rated my budget and rainy day fund where I received a score of B and A, respectively.

Overall I like Quizzle.com and recommend using it.  My only concern is the privacy issue where someone that has your background information can easily look up your credit report without your social security number.

To get your free report visit Quizzle.com.

Get Your Free Credit Score from Credit Karma

May 25, 2009 | Credit Reporting | 6 Comments
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Per the Fair Credit Reporting Act you are eligible for a free copy for your credit report every 12 months from each of the three reporting agencies (Equifax, Transunion and Experian).  However, getting your credit score will cost you until now.

Credit Karma now offers a free credit score from TransUnion.  I just signed up and got my credit score of 748.  See screen show below.  Besides the credit score, Credit Karma also offers some statistics on how your credit score compares to others.

Per the screen shot below, 17% of people scored in my range of 700 to 749.  My score places me in the top 78 percentile when compared against all US consumers and is considered good.

Screenshot of Credit Karma

Credit Karma

 

I’m currently in the process of refinancing my mortgage and received a copy of my credit score ordered 4/15/09.  The report showed by credit score is 808 with Transunion.  So there is some discreprency with Credit Karma unless my score dropped 59 points in a little over one month.

Since Credit Karma only offers 1 credit score (from Transunion), you will have to consider a fee based service such as equifax.com which gives you all 3 scores.

To get your free credit score visit CreditKarma.com.  To get your free annual credit report visit AnnualCreditReport.com.

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No Risk Stock Market Investing with Absolute Return Notes

March 2, 2009 | Credit Reporting | Financial Tips | Stocks | 2 Comments

Do you know you can invest in the stock market with no risk of losing the money you initially invest?  There’s a fairly new type of security called Absolute Return Notes which offers investors a chance to earn investment returns tied to the stock market’s performance, without risking any of the money invested.  Your principal investment is 100% guaranteed.

Absolute Return Notes started in Europe and have recently become popular in the U.S. as investors struggle to cope with the depressing stock market.

During a set time period, the notes pay the absolute value of the performance of a stock market index, within a specified range.  As an example, if the S&P 500 goes up or down 8%, the note will pay 8%.  However, if the market goes out of that range, for example 20%, you will make no money but will get back 100% of your principal.  Now if the index gains 25%, you still get no money but it may hurt thinking you could have made a nice return.

Issuers of Absolute Return Notes include UBS, Barclays and Merrill Lynch.  Fees for the notes are typically included into the formula that determines the payout.  If you pay $10K for a note that offers 100% principal protection, you will get at least $10K at maturity.

Absolute Return Notes is a good short-term investment strategy if you believe the stock market will trade flat or sideways and you want to capitalize on its volatility in either direction with very little risk of losing your money.

How is Your Credit Score Determined?

August 27, 2008 | Credit Reporting | 1 Comment

Your credit score, also called your FICO score, developed by the Fair Issac Corporation, is determined by the information on your credit report.

Your credit score can change from month-to-month and is based on a variety of reasons such as how you pay your bills, loans you have, credit cards you may have opened, and even how many companies have checked your credit report.

Your credit score is determined by 5 main factors:

  1. Payment history to determine how you pay your monthly bills.
  2. Current debt with loans and credit cards. 3 – Length of time you have had credit or how long you have had credit cards and loans.
  3. The type of credit you have.
  4. Credit inquiries on your credit report.

 

This information is then statistically analyzed to determine a numerical number between 300 and 850 which is ranked as follows:

  • Excellent: 750 to 850
  • Good: 720 to 749
  • Fair: 660 to 719
  • Uncertain: 620 to 659
  • Poor: 300 to 619

 

The number represents the creditworthiness of a person, which is the likelihood that the person will pay their bills. Mortgage and auto loans usually use your score to determine interest rate charged. The lower a consumer’s credit score, the higher the interest charged due to the consumer considered a higher risk.

The credit score is typically from one of the three major credit bureaus which include Experian, TransUnion, and Equifax. You are entitled to 1 free credit report within a 12-month period from each of the three agencies which are available at Annualcreditreport.com. The report doesn’t list your credit scores, which is available for a fee.

In some states, such as California and Colorado, you can get a free credit report within 30 days of being denied credit or receiving sub-normal credit terms from a lender, due to their credit rating.