Your credit score is a numerical representation of your statistical likelihood to repay the credit that is extended to you. Your score is a snapshot of a specific moment in time but can and will change with new actions and the passage of time. Credit scores range from 300850 with 300 being low and 850 being high. The higher the credit score, the more favorable your credit history will be viewed when applying for new credit or applying for a refinance of existing credit.
Payment History = 35%
- Late payments will damage your score.
- A positive history will improve your score.
- The severity and quantity of delinquencies will also
impact your score.
Amount Owed = 30%
- Too many credit cards with high balances can lower a score.
Length of Credit History = 15%
- The longer the history, the better.
- How long have your credit accounts been
- How long has it been since you used certain
New Credit = 10%
- Research shows that opening several credit accounts in a short period of time represents greater risk, especially for people who do not have a long established credit history.
Types of Credit in Use (Healthy mix) = 10%
Example of ideal credit mix:
- 2 installment loans
- 3 revolving accounts with balances
- Balances on revolving debt below 30% of the high
- No collection accounts
- No public records
- No foreclosures
- No late payments
Monitor your credit. Order a copy of your free credit report from each of the three major bureaus at least annually from www.annualcreditreport.com.
Pay all of your bills on time or early. Even a 30-day late notice on a small credit card can have a significant negative impact on your scores.
Don’t co-sign loans! Their late payments are your late payments and will negatively impact YOUR credit scores!
Don’t close old revolving accounts no longer in use. It helps your scoring when established accounts are open with zero balances.
Don’t open new accounts unless absolutely necessary. (Inquiries may or may not affect your score depending on the rest of your credit history.)
Report fraud immediately. If you find yourself the victim of fraud, immediately contact the credit bureaus, your credit card companies, banks and the FTC at www.ftc.gov.
Do not extend or open new credit accounts while in the mortgage application process to purchase or refinance a home.
Under the Fair Credit Reporting Act (FCRA), if you find inaccuracies or incomplete information on your report, you have a right to dispute the errors. According to the Federal Trade Commission, you should take these steps:
- Tell the credit reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. Send your letter by certified mail, return receipt requested, so you can document what the credit reporting company received. Keep copies of your dispute letter and enclosures. The credit reporting company will investigate your claim and respond. If an investigation doesn’t resolve your dispute with the credit reporting company, you can ask that a statement of the dispute be included in your file and in future reports.
- Tell the information provider (that is, the person, company, or organization that provides information about you to a credit reporting company), in writing, that you dispute an item in your credit report. If the provider continues to report the item you dispute to a credit reporting company, it must let the credit reporting company know about your dispute.
And if you are correct that is, if the information you dispute is found to be inaccurate or incomplete the information provider must tell the credit reporting company to update or delete the item.
- For more information about how to dispute credit report errors, refer to the Federal Trade Commission (FTC).
You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). You can request a copy from AnnualCreditReport.com.
YOU CAN REQUEST AND REVIEW YOUR FREE REPORT through one of the following ways:
|Download and complete the Annual Credit Report Request form.
Mail the completed form to:
Annual Credit Report Request Service , P.O. Box 105281, Atlanta, GA 30348-5281
You can request all three reports at once or you can order one report at a time. By requesting the reports separately (for example, one every four months) you can monitor your credit report throughout the year. Once you’ve received your annual free credit report, you can still request additional reports. By law, a credit reporting company can charge no more than $12.00 for a credit report.
You are also eligible for reports from specialty consumer reporting companies. The Consumer Finance Protection Bureau (CFPB) put together a list of several of these companies so you can see which ones might be important to you. You have to request the reports individually from each of these companies. Many of the companies in this list will provide a report for free every 12 months. Other companies may charge you a fee for your report.
YOU CAN GET ADDITIONAL FREE REPORTS IF ANY OF THE FOLLOWING APPLY TO YOU:
- If you received a notice that you were denied credit, insurance, or employment or experienced another adverse action based on a credit report, you have a right to a free report from the credit Reporting company identified in the notice. To get the free report you must request it within 60 days after you receive the notice. Other types of adverse action notices you might receive include notice of an unfavorable change in the terms or amount of your credit or insurance coverage, or unfavorable changes in the terms of your employment or of a license or other government benefit.
- You believe your file is inaccurate due to fraud.
- You have requested a credit report from a nationwide credit reporting company in connection with the
placing of an initial fraud alert (you may request two free copies for an extended fraud alert).
- You are unemployed and intend to apply for employment within 60 days from the date of your request.
- You are a recipient of public welfare assistance.
- Your state law provides for a free credit report.
Warning: Be cautious of websites that claim to offer free credit reports. Some of these websites will only give you a free report if you buy other products or services. Other websites give you a free report and then bill you for services you have to cancel.
To get the free credit report authorized to you by law, go to www.AnnualCreditReport.com or call (877) 322-8228.
Common Credit-Related TERMS & DEFINITIONS
|CREDIT REPORTING COMPANY||Credit reporting companies, also known as credit bureaus or consumer reporting agencies are companies that compile and sell credit reports.|
|CREDIT REPORT||A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.|
|CREDIT SCORE||A credit score predicts how likely you are to pay back a loan on time. Companies use a mathematical formulacalled a scoring modelto create your credit score from the information in your credit report. It is important to know that you do not have just one credit score and there are many credit scores available to you as well as to lenders. Any credit score depends on the data used to calculate it, and may differ depending on the scoring model, the source of your credit history, the type of loan product, and even the day when it was calculated.|
|FAIR CREDIT REPORTING ACT||The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. There are many types of consumer reporting agencies including credit bureaus and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). Learn more about your major rights under the FCRA.|
|FRAUD ALERT||A fraud alert requires creditors who check your credit report to take steps to verify your identity before opening a new account, issuing an additional card, or increasing the credit limit on an existing account based on a consumer’s request. When you place a fraud alert on your credit report at one of the nationwide credit reporting companies, it must notify the others. There are two main types of fraud alerts: initial fraud alerts and extended alerts.|
|IDENTITY THEFT||Identity theft occurs when someone steals your identity to commit fraud. Stealing your identity could mean using personal information without your permission such as:
Social Security number
Credit card number
|MILITARY ACTIVE DUTY ALERT||Members of the military (such as members of the Marines, Army, Navy, Air Force, and Coast Guard) can request an active duty alert. When you place an active duty alert on your credit report, creditors must take reasonable steps to make sure the person making the request is actually you before opening an account, issuing an additional credit card on an existing account, or increasing the credit limit on your existing account. Active duty alerts last for 12 months. Your name also will be removed from the nationwide credit reporting companies’ pre-screen marketing lists for credit offers and insurance for two years.|
|SECURITY FREEZE||A security freeze on your credit report prevents new creditors from accessing your credit file and others from opening accounts in your name until you lift the freeze. Because most businesses will not open credit accounts without checking your credit report, a freeze can stop identity thieves from opening new accounts in your name.|
|SPECIALTY CONSUMER REPORTING COMPANY||Specialty consumer reporting companies collect and share information about your employment history, transaction history with a business or repayment history for a specific product or service.|
|THIN CREDIT FILE/NO CREDIT FILE||A thin credit file or no credit file means that a person does not have a credit history or not enough current credit history to produce a credit score.
See: Credit invisible.
Looking for Stronger Ways to Protect Your Credit?
Thanks to a new federal law, consumers can receive no-obligation credit freezes and year-long fraud alerts starting September 21, 2018. The new law Economic Growth, Regulatory Relief, and Consumer Protection Act will require Equifax, Experian, and TransUnion to set up a webpage for requesting fraud alerts and credit freezes. Here are a few other facts you need to know about the new act:
- What’s a credit freeze? A credit freeze restricts access to your credit file, making it harder for identity thieves to open new accounts in your name. Usually you get a PIN to use each time you want to freeze and unfreeze your account to apply for new credit.
- Currently, credit freezes may involve fees, based on state law.
- Starting September 21, 2018, it will not cost anything to freeze and unfreeze your credit file throughout the country.
Child Credit Freezes
- What’s a child credit freeze? A child credit freeze allows you to freeze a child’s credit file until the child is old enough to use credit.
- Currently, some state laws allow you to freeze a child’s credit file.
- Starting September 21, 2018, no matter where you live, you’ll be able to get a free credit freeze for children under age 16.
- What’s a fraud alert? A fraud alert will tell any business that runs your credit that they should check with you before opening a new account.
- Currently, consumers can request fraud alerts that last 90 days. To extend or continue, they must request a new fraud alert every 90 days.
- Starting September 21, 2018, an initial fraud alert will last for one year. It will still be free, and identity theft victims can still get an extended fraud alert for seven years.
Active Duty Military Fraud Alerts
- What’s a military fraud alert? A fraud alert will tell any business that runs your credit that they should check with you before opening a new account.
- Currently, active duty military members can request an alert that will last for one year and can be renewed to match the deployment period. No-obligation credit monitoring is not automatically available.
- Within a year, credit reporting agencies must offer free electronic credit monitoring to all active duty military.
Contact us today to learn more!