Credit Report FAQ's
This is where you will find the most frequent
questions we receive about credit reports. If you have a question we do
not address, please ask us directly! Please check our Mortgage Terms Glossary for commonly
used mortgage terminology. You will find more information about how you
can get a free copy of your credit report annually at the Federal Trade Commission. You can view a sample
credit report here.
What is a credit
report?
Do I have a right to know what's in
my report?
What type of information do credit
bureaus collect and sell?
What is credit scoring and how does
it affect me?
Why is credit scoring used?
What happens if you are denied
credit or don't get the terms you want?
Fair Credit Reporting Act
Your credit payment history and
profile is the makeup of a credit report. These files or reports are
maintained and sold by "consumer reporting agencies". One type of
consumer reporting agency is commonly known as a credit bureau. The
three credit bureaus are Transunion, Equifax, and Experian. You have a
credit record with these agencies if you have ever applied for a credit
or charge account, a personal loan, or a job. Your credit record
contains information about your income, debts, and credit payment
history. It also indicates whether you have defaulted on any debts,
have any outstanding judgments or child support, and whether or not you
have any bankruptcies.
Of course. By law, they must give you a free
credit report every year. You can receive your free
credit report here. The agencies must give you a free report
annually.
Keep in mind you
will be given a Consumer Credit
Report which is not the same as a Tri-Merge Credit Report.
If you want to find out what your FICO credit scores are so you can
obtain the lowest mortgage rate from our LIVE
PRICING ENGINE go to: Get
all 3 Fico Scores and Credit Reports
Credit bureaus collect and sell four
basic types of information:
Identification and
employment information
Your name, birth date, Social
Security number, employer, and spouse's name are routinely recorded in
your credit report. They may also provide information about your
employment history, home ownership, income, and previous address, if a
creditor requests this type of information.
Public record information
Events that are a matter of public
record, such as bankruptcies, foreclosures, or tax liens, may appear in
your report.
Inquiries
CRAs must maintain a record of all creditors who
have asked for your credit history within the past year. It is
generally beneficial to keep the number of inquires as low as possible.
Payment history
Your accounts with different creditors are
listed, and the balances, high balances, and outstanding balances are
listed. Related events, such as referral of an overdue account to a
collection agency, charge off accounts or other delinquencies may also
be noted.
Credit scoring is a system creditors use to help
determine your creditworthiness. Information about you and your credit
experiences, such as your bill-paying history, the number and type of
accounts you have, late payments, collection actions, outstanding debt,
and the age of your accounts, is collected from your credit application
and your credit report. The credit agencies use sophisticated
algorithms to assign a score representing your creditworthiness based
on your credit history, payment history, number of accounts, balance of
existing accounts, and delinquent accounts, if there are any.
Because your credit report is an important part of
many credit scoring systems, it is very important to make sure it's
accurate before you submit a credit application. To get copies of your
report, contact the three major credit reporting agencies:
Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report, but
everyone gets one free credit report per year! Go to Free
Annual Credit Report for your free annual credit report.
There is no obligation as this service is mandated by law.
Credit scoring is used as a gauge of scoring
individuals and assessing a creditworthiness to them based on their
credit history.
Credit scoring models are complex and often vary
among creditors and for different types of credit. If one factor
changes, your score may change -- but improvement generally depends on
how that factor relates to other factors considered by the model. Only
the creditor can explain what might improve your score under the
particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate
the following types of information in your credit report:
- Have you paid your bills on time?
Payment history is a major factor in credit scoring. If you have paid
bills late, have collections, or declared bankruptcy, these events will
not reflect well in your credit score.
- How long is your credit history? Generally,
the longer your history of holding accounts is, the more trusted you
will be as a borrower.
- Have you applied for new credit
recently? If you have many recent inquires this can be
construed as being negative by the credit reporting agencies. Only
apply for credit when you really want it.
- How many and what types of credit
accounts do you have? Although it is generally good to have
established credit accounts, too many credit card accounts may have a
negative effect on your score. In addition, many models consider the
type of credit accounts you have. It is important to not avoid them
altogether, though. Having three to four credit cards is a good
baseline.
- What is your outstanding debt?
It is important that you are not using all of your available credit. If
all of your credit cards are maxed out, your scores will reflect that
you are not managing your debt wisely. DO NOT USE MORE THAN
FITY PERCENT OF YOUR AVAILABLE CREDIT ON EACH CREDIT CARD!
If you are denied credit, the Equal Credit
Opportunity Act requires that the creditor give you a notice that tells
you the specific reasons your application was rejected or the fact that
you have the right to learn the reasons if you ask within 60 days.
Indefinite and vague reasons for denial are illegal, so ask the
creditor to be specific. Acceptable reasons include: "Your income was
low" or "You haven't been employed long enough." Unacceptable reasons
include: "You didn't meet our minimum standards" or "You didn't receive
enough points on our credit scoring system."
If a creditor says you were denied credit because
you are too near your credit limits on your charge cards or you have
too many credit card accounts, you may want to reapply after paying
down your balances or closing some accounts. Credit scoring systems
consider updated information and change over time.
If you've been denied credit, or didn't get the
rate or credit terms you want, ask the creditor if a credit scoring
system was used. If so, ask what characteristics or factors were used
in that system, and the best ways to improve your application. If you
get credit, ask the creditor whether you are getting the best rate and
terms available and, if not, why. If you are not offered the best rate
available because of inaccuracies in your credit report, be sure to
dispute the inaccurate information in your credit report.
The Fair Credit Reporting Act (FCRA)
is designed to help ensure that CRAs furnish correct and complete
information to businesses to use when evaluating your application.
Your rights under the Fair Credit
Reporting Act:
- Any company that denies your application must
supply the name and address of the CRA they contacted, provided the
denial was based on information given by the CRA.
- You have the right to a free copy of your
credit report when your application is denied because of information
supplied by the CRA. Your request must be made within 60 days of
receiving your denial notice.
- You have a right to add a summary explanation
to your credit report if your dispute is not resolved to your
satisfaction.
- You have the right to receive a copy of your
credit report. The copy of your report must contain all of the
information in your file at the time of your request.
- You have the right to know the name of anyone
who received your credit report in the last year for most purposes or
in the last two years for employment purposes.
- If you contest the completeness or accuracy of
information in your report, you should file a dispute with the CRA and
with the company that furnished the information to the CRA. Both the
CRA and the furnisher of information are legally obligated to
reinvestigate your dispute.
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