Bad Debt Solutions and Your Credit Report

Bad Debt Consolidation

A credit report is a factual record of how an individual has re-paid credit obligations in the past. Credit reporting agencies, or credit bureaus, maintain computerized records of all transactions. These profit companies can be privately owned or publicly traded and are in business to make a profit. They collect and distribute account information to their subscribers. Only companies that meet and adhere to certain guidelines may become subscribers to credit bureau services. These guidelines and regulations help protect consumers from businesses that do not have a legitimate purpose to gain access to credit reports and personal information.

Where do credit reporting agencies obtain information? Credit reporting agencies build their files and obtain information in a variety of ways.

CONSUMERS:

When a consumer completes a credit application, (mortgage, personal loan, auto loan, credit card or any other form of credit transaction) various pieces of identifying information such as name, date of birth, social security number, phone number, address (both current and past), and current place of employment are reported to the credit reporting agencies.

Note: Much of the identifying information comes from the credit applications you submit. Therefore, it is important when filling out a credit application to print clearly and fill out all requested information completely and consistently.

CREDITORS:

Creditors who subscribe to a reporting agency will report all account activity. A creditor may belong to one or more agency. Reported information includes:

* Date account was opened and type of account
* Credit limit or amount borrowed
* Account numbers (or partial numbers for security purposes)
* Interest rate
* Who is authorized to use the account
* Who else is obligated to repay the account
* Payments received and dates received
* Account payment status

PUBLIC RECORDS:

Credit reporting agencies gather information such as property liens, monetary judgments, filed bankruptcies, wage attachments or garnishments, and in some states child support and spousal maintenance. This information is gathered from local, state and federal courts.

Note: A bankruptcy filing will remain on your credit report for up to 10 years, whereas, other public record information remains for up to 7 years.

INQUIRIES:

Every time you or a credit grantor makes a request to see what is in a file, a record is made of the inquiry on your credit report. There are two types of inquiries, and the length of time that those inquires remain on your report varies. Excessive inquiries may be considered negative on your report. However, multiple inquiries of the same type within a 14-day period count as a single inquiry (e.g. when you are trying to obtain financing from different sources for an auto loan).

External:

External inquiries occur based on credit applications you initiate and are viewable by any lender who inquires on your credit file. Credit-grantors may access your files when you apply for things such as credit cards, loans, insurance, a mortgage or an apartment rental. Inquiries you initiate can be reported for up to two years.

Internal:

Internal inquiries are inquiries shown only to you, not to lenders to whom you’ve applied for credit. These types of inquiries do not affect your credit score. Samples of internal inquiries include: current lenders monitoring your account; potential lenders determining whether to offer pre-approved lines of credit; employers checking your credit file when making hiring or promotion decisions; or your own personal request for a credit report.

CONSUMER STATEMENTS:

If you are unable to resolve a credit reporting dispute with a creditor, you may add a 100 word personal statement to your report regarding the negative item. This statement will remain on your report for seven years, but may be revised or removed at any time.

COLLECTION ACCOUNTS:

When an account is placed with a collection agency by a credit grantor, the collection agency’s name and ID number will appear on the credit report. The original grantor’s name and the current balance owed will also appear. Collection agencies report payments received and current balance information as well.

What information is not in a credit report?

Your credit report does not contain information regarding race, religion, medical history, political affiliation, checking or savings account information, criminal records or any other information unrelated to credit.

When Can Creditors Review my Credit Report?

Consumers always have the right to review their credit report at any time. We suggest that you order and review your credit report prior to any major purchase such as a home or auto purchase or when refinancing. Anyone with a “permissible purpose” may review your credit report. This means there that they have a valid reason to review your report, as defined under the Fair Credit Reporting Act. Reasons for permissible purpose include:

For Credit Approval

Creditors may use a credit report to help them decide whether or not a person will be given credit, what terms will be offered, interest rates provided, etc. They will also use other personal information that you have supplied them. When you complete and sign an application, you give your creditors approval to obtain your credit report.

For Employment Purposes

Employers may view and use a modified version of your credit report. It is used to help assess an applicant’s character. Some employers use credit reports when considering promotions. You must give a prospective employer your permission and you will be asked to sign a separate document acknowledging that they will be obtaining your credit report. Current employers may review your report only if you have given permission as part of your employment. The report that employers receive does not contain account numbers, your year of birth and your spouse’s name. Employers are not permitted to ask those questions and the report does not show that information. This is done to comply with federal employment laws. Should you know you might be credit issues, it is best to be forthcoming and explain these issues to your perspective employer.

To Underwrite Insurance

Many insurance companies now request your permission to obtain a credit report when you apply for insurance. They consider the past payment patterns as part of their process of deciding insurance coverage. If you have questions regarding this use of your report, please contact the Department of Insurance in your state.

To Issue a Professional License

Organizations that grant licenses for certain professions that require an employee to be bonded, such as real estate agents, nurses, police officers and some other professions, may review your credit report.

In Response to a Court Order or Federal Jury Subpoena

In a very few cases, the courts may request your report directly from any credit bureau. This is very rare, and few consumers are ever affected by this action.

Internal Revenue Service

The Internal Revenue Service may pull your credit report when you have a tax debt and you are offering to make payment arrangements on that debt.

For Review or Collection Purposes

Creditors with whom you have an established relationship may periodically review your report. They may be reviewing it to offer other rates of interest or other credit products. Most credit counselors advise you to accept only those credit offers that you can afford and that fit your budget.

Credit Scoring

A credit score is a number that creditors use to assess the likelihood that consumers will repay their debts and make their payments on time. The number is generated using a statistical computer model that takes information from your credit report and ranks it numerically. The credit score is not a part of your credit history; it is simply a number that is generated at a particular point in time. Making payments, obtaining new credit, or other credit action can cause your score to fluctuate.

There are many existing sources for credit scores and creditors are even developing their own programs and systems for generating credit scores. One widely used provider of credit scores is Fair Isaac and Company. They produce their score — the FICO score — using proprietary formulas developed to compute personal credit scores. Freddie Mac and Fannie Mae endorse the formula that this score utilizes. Some other companies that produce a score you may be familiar with include: TransUnion’s Empirica score, Experian’s PLUS score, CreditXpert’s CreditXpert score, and Equifax’s Beacon score.

Each creditor and lender has a different corporate policy on risk levels. Keeping this in mind, it is important to note that there is not a minimum, or cut-off score, that is universally with all lenders. Lenders and credit experts agree that paying all bills on time as contractually agreed and never taking on more debt than you can afford will positively impact your score.

Each company that produces a score uses different criteria. As an example, FICO scores weigh the information that makes up your credit score as follows:
35% Payment History
30% Amount Owed to All Creditors
15% Length of Credit History
10% Amount of New Credit
10% Types of Credit In-Use

Scores typically range from the 300′s to the 800′s. Lenders equate higher scores with lower credit risk. A credit score is a “snapshot” of your potential risk at the time you requested the credit and is generated based on the information in your credit report at that moment.

Your score may be different from one credit-reporting agency to the next because your credit history may be different at each of those agencies.

Even if all lenders used the same score, each lending institution has its own criteria for approving loans. One creditor may extend you credit with a score of 675 while another lender may deny you credit based on the same score. Your score may affect the type of credit, amount of credit or the interest rate that a lender offers you.

First, How Do You Get A Copy of Your Credit Report?

Equifax
Credit Information Services
P.O. Box 740256
Atlanta, GA 30374-0256
Phone: 1-800-685-1111
Web Site: www.equifax.com

Experian
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
Phone: 1-888-397-3742
Web Site: www.experian.com

Trans Union
National Disclosure Center
P.O. Box 1000
Chester, PA 19022
Phone: 1-800-916-8800
Web Site: www.transunion.com

The Fair and Accurate Credit Transactions (FACT) Act entitles all consumers to a free credit report once a year from all three major credit reporting agencies which have established a centralized source for accepting the requests. You can order a free copy of your credit report by calling 877-322-8228, visiting www.annualcreditreport.com or mailing a standardized form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

For further information you may visit the website of the Federal Trade Commission at www.FTC.gov.

How do I dispute an inaccuracy on my credit report?

Along with a copy of your credit report, you will receive a dispute form. This form is used to dispute items that you believe are incorrect on your credit report. It is prudent to clear up any pending disputes before applying for new credit.

You can file a dispute via mail or online. Please refer to the contact information provided with your credit report and follow the specific dispute instructions provided by the credit reporting agency from which you obtained your report.

With the passing of the FACT Act, a consumer now has the option to dispute credit report information directly with the source of the incorrect information rather than the reporting agency. For example, if there is an error with a particular account, the consumer can submit a dispute form to the creditor instead of the credit reporting agency from which the credit report was obtained.

If a consumer chooses to dispute information directly with the creditor, the consumer must mail the dispute form to the creditor’s specified address. The consumer must identify specific information, including the basis for the dispute and also include all supporting documentation needed. The creditor has 30 days to complete the investigation. If they find that the information reported on the credit report is incorrect, they will notify each credit reporting agency to which they reported the information.

If a consumer chooses to dispute information with the credit reporting agency, the credit reporting agency must investigate the dispute by contacting the creditor. The creditor has 30 days to respond to the agency. In their response, the creditor must certify that the information they reported is correct. If the creditor cannot verify the account, or fails to get back to the credit reporting agency within 30 days, the information must be removed from the credit report. However, if the credit grantor follows up after the 30 day period, the data may be returned to the file.

Once a correction has been made on your credit report, you can request that the bureau send corrected copies of your credit report to creditors who have received a report during the last six months or any employer who has received a report during the last two years. If your request to correct an error on your credit report is refused, you can report their refusal to the Federal Trade Commission. You can also seek assistance from the Office of the Attorney General in your state. If you are unable to resolve a reporting dispute with a creditor, you may add a one-hundred word personal statement to your report regarding the negative item. This statement will remain on your report for seven years, but may be revised or removed at any time.

Your responsibilities as a consumer:

Below are a list of your some of your responsibilities as a consumer:

* Pay bills on time because late payments are reflected negatively and hurt your credit.
* Borrow only what you can repay.
* Read and understand any credit agreements.
* Notify the creditor if you cannot meet the payment arrangements.
* Store credit cards in a secure place and report lost or stolen cards promptly.
* Never give your credit card number over the phone unless you initiate the call.
* Shred any document that contains your account number.
* Sign credit cards as soon as they arrive.
* Remember to request your card and receipt after every transaction.
* Notify your creditor promptly if your statement is incorrect or was not received.
* Know what is on your credit report.