HOW TO OBTAIN YOUR FREE CREDIT REPORT
Starting December 1, 2004, federal law will allow you to receive a free credit report once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. Log on and follow the instructions to obtain your credit report. The website address is: www.annualcreditreport.com You can also request your report via phone by calling 1-877-322-8228 or you can request your report by mail with a request form to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281
KEEPING SCORE: FACTS ABOUT CREDIT SCORES
Who’s keeping score? The credit industry is. Every time you apply for a new credit card, a mortgage, perhaps even an insurance policy or a job, your application is judged in part on your credit score. According to a 2005 survey by the Consumer Federation of America and Fair Isaac Corp., 49% of 1, 013 consumers polled do not understand that credit scores measure your credit risk to a lender.
What is a credit score?
A credit score is a three-digit number that lenders use to objectively measure your creditworthiness. “The score allows creditors to rank consumers from high to low in respect to their likelihood of repaying credit,” says Suzanne Boas, president of Consumer Credit Counseling Services of Atlanta. Your credit score is a snapshot of your finances at a particular moment in time. As information in your credit file changes, so will your credit score.
Who calculates my credit score?
“Most consumers seem to believe there’s only one credit score used by lenders,” says Craig Watts, consumer affairs manager for Fair Isaac & Co (FICO), the largest creator of credit scores. While it’s true that FICO scores are used by most lenders, there are literally hundreds of different kinds of credit scores by lenders today. Even though the three main credit bureaus that compile your credit report all use a FICO scoring model, they weigh credit factors differently. So your FICO score can vary by 30 points to 100 points between the three bureaus.
What factors are taken into consideration for my credit score?
They look primarily at credit information. That information falls into five categories:
· Payment history (35%) – This is perhaps the most important factor. Have you ever had an account sent to collections? How many times have you been late? How late or how recent were those late payments.
· Total debt (30%) – How much overall debt do you have? How may credit cards have balances on them? How many are close to their limits? How close are you to your overall credit limit?
· Length of credit history (15%) – Is the person an emerging consumer or someone who had paid bills on time for 10 years?
· New credit (10%) – Are you shopping aggressively for credit right now? A flurry of activity and inquiries on your credit report raises suspicion. There may be a change in your life that’s not reflected on your credit report, like a divorce or a loss of a job, that may impact your financial situation.
· Credit Mix (10%) – Do you have a “healthy” mix of credit: bank cards (Visa, MasterCard), store cards, gasoline cards, and so on?
Remember: Your credit score is only as good as the explanation behind it. What consumers need to know is what is behind their score: why the score turned out as it did, what they’ve done in their credit management that changed the way lenders view their credit risks, and what steps they can take to improve their credit standing over time.
Resources
National Foundation for Credit Counseling (NFCC)
www.nfcc.org
HSH Associates: A General Guide to Credit Grades
www.hshassociates.com/bcd-specs.html
Fair Isaac & Co
www.fairisaac.com
Experian
www.creditexpert.com
Equifax/FICO partnership
www.equifax.com or www.myfico.com
Trans Union
www.transunion.com |
