1. Understanding Your Credit Report Presented by: USE Credit Union
2. Today we will cover:• How your credit report is used.• How you can order your own credit report.• How to dispute incorrect information.• How your credit score is calculated.• How can you improve your score.
3. Credit Reporting Agencies• Equifax – based in Atlanta, GA • The main bureau that USE Credit Union uses.• Experian – (formerly TRW) – based in Orange County, CA • Pulled for additional information or for comparison.• TransUnion – based in Chicago, IL
4. Who is looking at your Credit Report?• Lenders: Purpose is to evaluate your credit-worthiness and level of risk.• Employers: Before extending an offer of employment.• Insurance companies: To establish rate premiums.• Landlords: To evaluate your risk as a tenant• Used by many companies for marketing and demographic information.
5. Where does this information come from? • Information reported monthly or quarterly by financial institutions. • Most, but not all, financial companies report. • Smaller institutions may report quarterly or not all. • Not all institutions report to each of the three main bureaus. • Reporting is a courtesy, not a requirement or obligation.
6. What is in my Credit Report? Personal Information Credit Account Information/ Trade Information Public Record Information Inquiries Collection Information
7. Inquiries• “Soft hit” vs. “hard hit.”• One inquiry may decrease score by a few points. • Inquiries have a greater impact if you have few accounts or a short credit history.• 45 day window for auto and mortgage shopping.• Ignores all inquiries made 30 days prior to scoring.
8. How to obtain a copy of your Credit Report• Equifax: www.equifax.com• Experian: www.experian.com• TransUnion: www.transunion.com• One free credit report every 12 months• www.annualcreditreport.com – Does not provide credit score (available for purchase)
9. Reasons to check your Credit Report• 1 in 6 reports contain errors.• Inaccurate information can damage your ability to: - Buy a house - Rent an apartment - Obtain credit or insurance - Open a checking account - Get a job - Signals of ID Theft
10. When information is not accurate • File a dispute with the credit reporting agency. • Credit reporting agencies are governed by the Fair Credit Reporting Act. • Disputes filed directly with the creditor are resolved at their discretion. • Disputed information not verified within 30 days will be blocked from your report. • Beware of credit clinics: There is nothing they can do that you can not do yourself.
11. FACT ACT Accuracy of Credit Information• Effective July 1, 2010• Regulators have identified circumstances when institutions who report information to the Credit Reporting Agencies must investigate disputes about the accuracy of information on a credit report when a member makes a request.• Consumers must submit dispute in writing.• ** Regulatory changes are taking place that will continue to impact credit and credit scores.
12. What does this mean?• Reporting institutions must conduct an investigation on a consumer dispute when it relates to:• Whether there is individual or joint liability on an account• Whether the member is an authorized user of the credit account• The type of account, principal balance, scheduled payment, or amount of credit limit being reported• Current payment status, high balance, date a payment was made, amount of a payment made, or the date the account was opened or closed
13. What is a Credit Score?• A 3 digit number between 300 - 850• Often referred to as the “FICO” score• A snapshot of your credit risk at a particular point in time• A numerical value based on information contained in your credit report
14. Benefits of Credit Scoring• The Credit Score gives lenders a fast, objective measurement of your credit risk:• Credit decisions are fairer• Older credit problems count for less
15. How your score can save/cost you money
16. Components of the FICO Score 10% 10% 35% Payment History Amounts Owed Length of History New Credit15% Types of Credit 30%
17. The impact of missing a payment
18. Revolving Debt Signals Balances vs. Credit Limit • Under 15%: RELAX • 15% to 20%: BE CAUTIOUS • Over 30% DANGER
19. The Importance of Capacity
20. What HURTS your score?• Missing a payment.• Credit cards at capacity.• Closing out credit cards.• Shopping for credit excessively.• Opening numerous trades in a short period of time.• Having more revolving loans in relation to installment loans.
21. What does NOT affect your score? • Income, race, religion, age • Debt ratio (total monthly payments divided by monthly gross income) • Length of residence • Length of employment • Child support or family obligations (Unless they become collection items)
22. Remember› Your credit report’s accuracy is your responsibility.› Financial institutions only read the information provided on the report.› Credit reporting agencies only report the information provided to them.› It is the consumer’s responsibility to ensure that information is accurate and current.› Your credit score is one of many factors that creditors look at.