Who Looks at My Credit Report?

With the passing of each year, your credit report is used more and more often as a yardstick to measure your character. Prospective creditors will always review at least one of your credit reports before granting you credit. Today it is increasingly common for insurance companies to review your credit before extending auto or health insurance. Many employers now check credit before they consider you for a position. If you rent, you may have already been through a credit check to determine your worthiness as a renter.

1) Fact: Only those to whom you've applied for credit or given permission can look at your credit report.

Potential employers, landlords, insurers and others may also look at your credit report, and many actually do.

2) Myth: Collection agencies can call you anytime and do as they please.

To stop collection agencies from calling you, simply send them a cease and desist letter stating they are only allowed to contact you via postal mail. This ability is afforded you via the FDCPA. Collection agencies have a series of actions they must do to be in compliance. You would be surprised at just how many FCRA and FDCPA violations are committed on a daily basis by many collection agencies. Never speak with a collection agency over the phone. Conducting discussions via written form is best because you have proof.

3) Fact: Paying a collection account will not improve your score.

As far as credit scores go, a paid collection account is the same as an unpaid one. Your official credit score is called a FICO score. It takes into account many things such as:

• Age of overall credit file.
• Number of accounts in good standing.
• Number of accounts delinquent.
• Negative items: liens, bankruptcies, repossessions, etc.
• Time since the negative item was created.
• Amount of your credit being used (utilization).
• New account under six months old (which hurt your credit).
• Number of hard inquiries.

4) Myth: You must pay any bill that comes to your home from a collection agency.

Under the law you have the right to challenge the legitimacy of any bill sent to you-it is called validation. By sending a validation letter to a collection agency they must, by law, cease all collection activities until they can validate the debt. It is important to note the word is validation and not verification, which mean two entirely different things. Validation means they must submit to you proof the bill is yours, which is not a simply an invoice sent to you. Until that is properly done, they can not report the item to your credit report, ask you for money or do anything which can be deemed further collection activity. Do they anyway? Yes they do. This is why it is important to know the law, which is on your side.

5) Your credit report score is influenced by many things such as:

• Late payments
• Amount of credit in your credit lines
• Amount of credit in use
• Charge-offs
• Bankruptcy
• Tax liens
• Judgments
• Credit inquiries
• Collection items
• Number of credit lines

Your credit report score can be reduced by as much as 100 points if you use too much credit. For example, if you have $100 in total credit available to you and you currently are using $50 worth, your utilization is 50%. Anything over 30% and you start getting knocked down. It is vital you keep your utilization under 30%.

Your credit report score is also reduce each time you don't make a payment on time, have an item in collections, and even excessive inquiries can knock your score down (normally a few points each).

What factors affect your credit score?

There are five factors, which are used in credit scoring calculations that determine your overall credit score.

q       Previous Credit Performance (Payment History) 35% A lender wants to know what your payment history is like. Have you paid everything on time, are you late on anything now, and so on. Your payment history is just one piece of information used in calculating your score, although it can be the very important.

q       Current Level of Indebtedness (Amount Owed) 30% How much is too much? Can the borrower pay me and still afford to pay his other bills? Not necessarily. Having available credit can actually help your ratio of debt to available credit. These are the types of questions that most borrowers want to know and the answers are almost as important as your previous credit history.

q       Amount of Time Credit Has Been In Use (Length of Credit) 15% Generally speaking, the longer the credit history the better your score. However, this factor only makes up 15% of your total score so even young people, students or others with short histories can still score high overall as long as the other factors show good. If you are new to credit than there is little you can do to improve this part of your score. Open an account and be patient.

q       Pursuit of New Credit (10%) Credit is much more popular today. Just look at the number of credit card offers you get via the Internet and in the mail. Consumers can now shop for credit and find the best terms to meet their needs. Each time someone runs a credit check on you, it creates an inquiry.

q       Fair Isaac has changed some of its calculations to account for these new trends. Specifically, they treat a group of inquiries - which probably represents a search for the best rate on a single loan - as though it was a single inquiry (note: this only applies to auto or mortgage loan inquiries.) For example, auto loan inquires that are within 14 days of each other only count as one inquiry.

q       Types of Credit Experience (10%) A healthy mix of different types of credit, installment loans, retail accounts, credit cards, and mortgage. This score is not normally a key factor in determining your score but it can help a close score. It's not a good idea to try and open different types of accounts just to try and make this factor better. It will likely reduce your score in other areas. You should never open accounts you don't intend to use anyway.

q       What type of accounts you have, and how many, can make a big difference. The optimal ratio of installment versus revolving accounts depends on your profile and differs from person to person. One factor that seems to have significant influence is your percent of open installment loans. Too many can lower this portion of your score.

6) Raising Credit Score

Raising credit score, yes indeed. Here are steps to take:

• Make sure your utilization is under 30%
• Make sure you have no more than 1-2 inquiries from past 6 months
• Work to eliminate negative items like late pays
• If you do not have many good credit lines, open some more and diversify (gas, department stores, major bank cards, etc). Don't over do it though.

7) Automobile Financing
If you are making payments on a car, you are probably paying between $5,000 and $9,000 more just for having bad credit. This added interest shows up every month in a higher payment. Take a look.

Home Mortgage
Bad credit in auto financing can really hurt, but it is nothing compared to the cost of bad credit when a home is involved. A typical home can cost between $50,000 and $130,000 more in interest if you are buying the home with bad credit.

8) What this means for you the consumer is:

Low Credit Score = "Higher Risk" with higher interest rates, tougher loan provisions, or worse- no loan at all
High Credit Scores = "Lower Risk" with lower interest rates, better loan terms, and better product to buy

9)Prime, sub-prime, and high risk

Prime If your credit score is above 640, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card.

Sub-Prime If your credit score is below 640, you are "sub prime", and will likely pay a much higher interest rate on your loan.

High Risk Below 560 is the high risk score. At least that is how most lenders and credit issuers perceive it. You can still get a credit card but you will likely be hit with a security deposit or high acquisition fee. In addition to that your interest rate will likely be 22 to 23%. You can forget about most home loans and the majority of new car loans at this score. Below 560 is no place to be. You will pay much, much more in higher interest and unnecessary fees. You may even pay more for your insurance rates. A very low score can even prevent you from getting a job with many companies.

10)Improving your credit score

Now that you know how your score is calculated, you can begin making changes to your current financial planning. The best things you can do are simple.

q       Pay your bills on time. Sounds simple, but this is the biggest thing you can do to keep your score high. Delinquent payments and collections have a major negative impact on a score.

q       Keep your balances low on unsecured revolving debt like credit cards. High outstanding balances can affect a score.

q       The amount of your unused credit is an important factor in calculating your score. You should only apply for credit that you need.

q       Make sure the information in your credit report is correct. If its not, dispute it with the credit agencies and/or with the creditor directly.

q       Removing negative items on your credit reports has the biggest impact on your FICO score. Generally, negative items stay on your reports for seven years but you can hire a professional credit report repair service such as Turn-Key Credit Solutions, LLC. to do it for you.

11) What Kind of Information Appears on the Credit Report?

Merchant Trade Lines These include all regular credit lines such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors.

Collection Accounts When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any type of collection account, whether paid or not, is considered very negative by all credit grantors.

Public Records Public records include bankruptcies, judgments, liens, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered negative by all credit grantors.

Inquiries Every time a potential credit grantor looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the number of inquiries is very few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit grantors may become nervous and deny you credit.

12) How Long Will Negative Information Stay on My Credit Report?

The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for a Chapter 7 bankruptcy, which can be reported for up to ten years. These are the time limits for reporting negative credit. The creditor or the credit bureau can choose to have the negative credit information deleted whenever they please. Inquiries may remain on the credit report for up to two years.

13) Negative items must remain on reports for seven years (or ten years for bankruptcy trade lines).

That's sheer and utter balderdash. Even so, consumers hear it every day when they telephone creditors directly: "Sorry, by law that has to remain on your report for seven years." The next time you hear that, know this: The automaton posing, as a customer service representative is either spreading lies or ignorance, neither of which is good for your physical or mental health.

Sure, the bureaus want consumers to believe the lie because they have based their business plans upon reporting lies to their subscribers, and they don't want to run out of them. The truth, though, is that nobody is required to report anything about any of us for any minimum length of time to anybody else. Put bluntly, relevant laws like the Fair Credit Reporting Act only serve to place LIMITS upon how consumer-reporting agencies can and cannot behave.

14) Does the CCCS help consumers restore credit?

Consumer Credit Counseling Service or CCCS is a non-profit debt counseling service that assists consumers who are over their heads in debt. CCCS is funded and controlled by the credit grantors and the credit bureaus. Often, CCCS provides a beneficial service to the consumer. Because of the obvious allegiance between CCCS and the credit bureaus, you cannot reasonably expect CCCS to do anything that the credit bureaus would frown upon, such as help you restore your credit. In fact, if you decide to leave CCCS before you have finished their program, they can list your failure to complete the process as a negative listing on your credit report. When you participate in the CCCS program, your creditors will sometimes  note it on your credit report. The fact that you resorted to a debt-counseling program is a huge red flag for prospective credit grantors. Remember, paying off your debts is a step in the right direction, but it does not restore your credit.

15) Are there negative listings, such as bankruptcies and foreclosures that are impossible to remove from the credit report?

There is no type of negative listing that hasn't been repaired and removed from a credit report thousands of times. Negative items, such as bankruptcy or unpaid debts, are certainly more difficult to repair and remove from the credit report, but this has more to do with the operational systems of the credit bureaus than with the severity of the bad credit item. For example, judgments and tax liens are severely negative listings, yet are, overall, easier to repair.

16) I've heard that disputing the credit report is easy and any person can do it himself for the price of a few postage stamps. Is that true?

Disputing the credit report is easy. Getting results (and actually repairing bad credit) is amazingly difficult, complex, and infuriating. It isn't a coincidence that the Federal Trade Commission receives more complaints against credit bureaus than any other type of business. If you call the FTC today to report a complaint about the credit bureaus, their phone mail system will ask you if to press one if your complaint is about the credit bureaus, and press another number if your complaint is about anything else. Clearly, this situation evolved out of deep consumer frustration with the uncooperative nature of the credit repair process.

Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking a large number of lawsuits, the credit bureaus seem to do everything in their power to discourage consumers from making progress with their credit repair. Repairing your own credit is like repairing your own transmission or representing yourself in court; it is possible, but you must decide if you are willing to take the time and assume the risks of doing it yourself.

Unless you hire a professional to help you, credit repair will have to become a full-fledged hobby.

17) If I declare bankruptcy, can I begin my credit report all over with a clean slate?

Many bankruptcy attorneys do not adequately understand or explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to the credit rating what the atomic bomb is to the battlefield.

When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an "included in bankruptcy" item. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes very difficult to remove all trace of the bad credit. If at all possible, you should avoid bankruptcy.

18) If I build enough good credit, will it offset my bad credit and make me credit worthy?

Any amount of bad credit is devastating to your chances of being approved by a credit grantor. Most credit grantors never actually look at your credit report. A computer pulls your credit report, rates your credit standing, income, indebtedness, and stability, generates a number (or FICO score,) then spits out an acceptance or denial. Even one or two slow pays will usually trigger a credit card or personal loan denial. The slightest amount of negative credit will cause the interest on an auto loan to skyrocket. You will probably find that even a little bad credit, regardless of how much good credit you have, is an unacceptable barrier to credit approval.

19) Is it illegal for creditors to take a negative, accurate listing off my credit report? They tell me that the law requires that these items remain on the credit report for at least seven years.

When you speak with credit grantors, collection agencies, or credit bureaus, their typically under-educated staff may tell you all manner of such pseudo-legal nonsense. The law demands that negative listings appear on your credit report for no longer than seven years. The credit grantor or the credit bureau can choose to delete the negative credit listing whenever they see fit.

20) What does the law say about repairing your credit?

As the credit bureaus computerized their processes and greatly expanded their reach and influence in the late 1960s and early 1970s, consumer complaints began to pile up at the FTC and state attorney generals' offices. The credit reporting agencies quickly became huge bureaucracies second only in size to the federal government. Yet, the credit bureaus expressly served only the needs of their clients, the credit grantors.

Many consumers were negatively affected by the credit bureaus, but they had no way to correct or change their credit information. The American consumer lay completely at the mercy of the credit bureaus. The United States Congress enacted the Fair Credit Reporting Act (FCRA) in 1971 to insure that the credit bureaus investigate the credit items disputed by consumers. This federal law set procedural guidelines, which gave the consumer the right to challenge the accuracy, validity, and verifiability of the credit listings appearing in their consumer credit report. It also required that the credit bureau repair any credit listing if it was inaccurate or could not be verified.

In theory, the FCRA charges the credit bureaus with responsibility to the consumer as well as the credit grantor. In reality, the credit bureaus resist, resent, and reject consumer disputes. The credit bureaus would rather be left alone to make a profit. And, each time a consumer challenges his credit, profit is lost.

The credit bureaus first defend their profits by erecting walls of stall tactics, including requests for more information, further clarification, and additional identification. The vast majority of consumers give up before they even receive copies of their credit reports. If a consumer manages to get a credit report, decipher the codified information, write a coherent dispute, and mail it, the bureaus may still find some reason to disregard the challenge. The entire dispute system is designed to frustrate and discourage the consumer.

Many consumers have the idea that the credit bureaus must complete their investigation within thirty days or be forced to remove all disputed information. They threaten to sue the credit bureaus if they don't conclude their investigation in time and repair their credit. In practice, such thinking is delusional. Nobody forces the credit bureaus to do anything.

21) How do you go about completely repairing your credit and getting new credit lines, mortgages, etc.?

Any credit repair consists of two phases: removing the negative listings from your credit report and adding new, positive listings.

Since just a couple of negative listings will earn a rejection from most creditors, repair of your negative credit should be the first priority. After bankruptcy, for example, the credit report will show many negative listings including the bankruptcy filing, discharge and numerous "included in bankruptcy" listings. While removing a bankruptcy from your credit report is no easy proposition, it is possible and definitely worth the effort.

Most home loan guidelines (including FHA guidelines) require that you have no negative credit appearing within the last two years. This means that you may have no late pays within the last two years and that any collection, lien or judgment has been paid more than two years ago. Even if you have some bad credit in the last two years, you can often find a mortgage amongst the "sub-prime" or "sub-A" lenders that will finance you even before you repair your credit. These loans will charge a higher interest rate and require more equity or a larger down payment before they will close. If you have good income and a reasonable debt to income ratio, a sub-prime loan may be the key to refinancing or getting a home while you repair your credit. In any case, if you are working on your credit repair, you may be able to refinance within a year at better terms.

Automotive financing will typically allow some negative credit before credit repair, but with less than optimal terms. If you have a few late pays, you may pay a little more in interest (but it adds up fast, to be sure.) If you have truly awful credit, you may still get an auto loan, but at very high rates (but you should definitely repair your credit in the meantime.)

Standard rate credit cards seem to be the most difficult when it comes to credit that still needs credit repair. Most standard rate cards will reject you immediately for any negative credit whatsoever. Yet, there are many credit cards that work with bad credit and help you to repair your credit. Some require deposits and others require a significant annual fee. Most have low credit limits.

There are a number of good secured and unsecured credit cards that advertise on the Internet. These cards are designed to help you to repair your credit. Understand, however, that secured credit cards will appear on your credit report as "secured" and will not necessarily repair your credit history as much as an unsecured card.

There are a number of creditors who are traditionally more accepting of those with little credit history or who are in credit repair. For example, many college credit unions will extend low limit credit cards to students without a credit history. Many department stores, such as Sears, will extend a credit line to encourage you to shop at that store, even if your credit repair isn't yet complete. Electronics stores, furniture stores and cosmetics shops are all usually open to extending credit to credit repair candidates.

As with any line of credit, you must make sure that you handle these new accounts responsibly. It is a temptation to use a department store credit card frivolously. Just remember that you have to pay back every dime, with interest.

22) Can you add good credit to your credit report by having another person add you as an authorized user to one of their credit cards?

When another person adds you to a credit card as an authorized user, the credit card company will typically place the account on your credit report as well, serving to help repair your credit. Often, the account will carry a note indicating that you are an authorized user rather than the primary cardholder. Even so, this serves to substantially improve your credit history.

On the other hand, the account will not typically show up with the entire account history, but will show only from the time you were added as an authorized user.

Beware: if the account goes delinquent, it may negatively affect your credit report and the credit card company may even attempt to recover payment from the authorized user. If this happens, your credit repair can slip even further behind.

23) Five Reasons to Check Your Credit Report Regularly:

• Inaccuracies & Mixed Credit Files: Many inaccuracies on a credit report can be the result of simple human error, and are therefore are not difficult to dispute. Of course, if you don't order your credit report, you might never know about it. Whether the inaccuracies relate to payments not credited, late payments, or data mixed in from the credit file of someone else with a name similar to yours, you will want to contact the credit bureau to dispute inaccurate information promptly.
• Tracking Payments: One of the most important elements of credit is a demonstrated history of on time payments. Once you send the check though, anything can happen--a delay in the payment being received can kick you over to a 30-day delinquency. If you call your creditor and explain the situation, they might adjust the information. Of course, if you don't read your credit report, you won't necessarily know which payments are being received and reported properly.
• Identity Theft: This issue alone is reason to order your credit report immediately. Identity theft is an insidious crime, involving a thief who assumes your name to open new accounts, divert your card statements to another address, and run up all sorts of bad debt without you ever knowing about it until collectors come calling. Over time, identity theft could jeopardize your ability to obtain further credit. The best way to catch a thief who is using your name is by getting a copy of your credit report, which will show you if there are accounts listed you know you haven't opened. For example, if a thief has intercepted a pre-approved credit card offer in your name and sent it in with a change of address, your credit report will include the account.
• Inquiries: If you're shopping around for a loan or more credit, you should know that when creditors check your credit, it places an inquiry on your credit report. Inquiries can add up, which is often interpreted as a negative by creditors. For this reason, too many inquiries can actually make getting credit more difficult. Moreover, if you didn't authorize someone to look at your credit report and they did, they may have broken the law.
• Credit Fraud--Unauthorized Charges: Credit fraud involves the theft of your credit card or account number to make unauthorized charges to your account. Though consumers are protected financially from this abuse, other creditors may take note of all this activity and decide to raise your interest rates or refuse to grant you a loan. Ordering your credit report will help you catch new activity on accounts that you haven't been using, or may have closed.