Credit Basics for Credit Reports/Repair

Credit can not be denied to you because of race, sex, color, religion, marital status, national origin, age (if you are over 18) or because you receive income from a public assistance program. Whether or not you can receive credit is judged solely on your past credit history, or in some cases, the history of your spouse or former spouse. You can find these rights outlined in the Equal Credit Opportunity Act.

No, some individuals and businesses are allowed, for business reasons, to obtain credit report on people other than themselves, but there are strict laws and penalties in place to ensure that this privilege is not abused.

A lender figures your credit score (FICO score) by taking your credit history and measuring it against a database of habits in the general borrowing population. That, in turn, determines whether your tendencies match those of borrowers who default on debt, declare bankruptcy or find themselves in various types of financial difficulties.

Credit scores are a number roughly between 300 and 800. A number higher than 660 will almost guarantee a consumer a loan. Anything between 620 and 660 is not bad either, but a consumer may need to convince the lender that a loan to them would be worth it. If a credit score is below 620, receiving a loan may be difficult.

Of course, exceptions are sometimes made if the credit report has incorrect, incomplete, or not enough information on it. An unusual event, such as a job loss or extended sickness, may excuse borrowers as well, depending on the lender.

When determining how high a credit score will be, the following five characteristics typically separate good credit from not-so-good credit:

• Late payments in the past. People who have failed to make timely payments in the past are more likely to do the same in the future.
• How you have used your credit in the past. If you have one or more credit cards that are maxed out or close to it, you are more of a risk than a person who has a high limit but is not anywhere close to using it up.
• The length of your credit history. People who have had credit for a long time generally pose less of a borrowing risk.
• The number of times you have applied for credit. The number of times you have applied for loans, credit cards or other debt instruments may count against you when wanting to receive yet another loan.
• The number of different types of credit you have. Someone with a combination of installment and revolving loans is generally less risky than someone who has only a secured credit card.

Beginning or extending a family is a life change that puts demands on your credit. It is especially important to take good care of your credit when you take on the added responsibility of children. If you take good care of your credit when your children are young, you will be able to take care of them as they get older.

Whether two people are pooling their resources together or severing ties, the change in lifestyle involves new responsibilities and issues for personal credit.

• Name changes. If you change your name, make sure your creditors and the credit bureaus are notified. If you do not notify them, you may lose your credit history.
• Keep at least some credit in your own name. Women especially must consider keeping some credit in their own name. For example, Jane Doe, who has never paid a bill late in her life, may be denied credit because her credit history is under the name Mrs. John Doe.
• Those who buy together, pay together. Even if a divorce decree requires one of the parties to pay the bills or if only one of you ran up the charges, a creditor considers both parties responsible. Arrangements must be made with the creditor if one of you is to be released from liability for the debt.

Buying a home, especially for the first time, makes significant demands on your credit. A home loan requires a solid credit rating, and once it takes affect, it can dramatically change some aspects of your credit. In the first place, homeowners build equity. This is an asset that contributes to their net-worth with each payment. They also establish another level of credit history and stability by making timely mortgage payments. Lastly, a mortgage is a large loan, and may impact things like your debt-to-income ratio in the first few years of the loan.

If you and your spouse share a checking or savings account, by law a creditor cannot automatically close the account or change the terms because of the death of your spouse. You may, more than likely, be asked to update your application or reapply in your own name. The creditor will then decide whether to continue your credit or change your credit limits.

Payments must be at least 30 days late before they can appear on your Credit Report. Even though a payment made within this timeframe may not show up on your credit report, late payments can cause a number of fees or increases in interest rates with the lender directly. Therefore, it is best to pay your bills as soon as possible or in a timely manner after receiving them.

Depending on the type of negative data reported, there are a few different timeframes that a negative item will appear on a consumer's credit report. Usually, late payments (payments made 30 days or more past the due date), foreclosures, and collections will appear for 7 years. With bankruptcies, a Chapter 13 will also appear for 7 years, while a Chapter 7 will appear for around 10 years.

The cost of your credit report will vary upon which bureau you request it from and which state you live in.

The credit bureaus do not allow most lenders to show you a copy of your own credit report. However, you can purchase a copy of your credit report from the credit bureaus.

In the United States, Equifax, Experian, and Trans Union are the three major credit bureaus that provide nationwide coverage of consumer credit information. Many national lenders report consumer credit information to all three. However, smaller banks, most credit unions and other credit grantors may report to only one, or none. Therefore, the information you receive from one credit bureau may not be the same as what you would receive from another credit bureau.

Yes, mistakes on your credit report may not always be your fault and it is definitely worth the effort and time to make sure they are resolved. The following is a list of standard procedures to follow when you find a mistake on your credit report...

• Contact the company directly, asking that a written statement of the error be sent to all three credit bureaus.
• Make sure you follow up with all three credit bureaus to guarantee that the merchant has made the changes.
• Make photocopies of any documentation that supports your claim.
• Write a letter to each credit bureau that lists the mistake, stating what is wrong, including your full name, your middle name, address, date of birth and Social Security number. Always remember to note if your name is beyond the first generation (Henry VIII, John Doe, Jr.).
• You may want to include a copy of your birth certificate just in case your name was mixed up with someone else’s. After all is said and done, if you are unsatisfied with the findings of the credit bureau, you are entitled to submit a statement that will be placed on your credit report for no charge. This statement will be attached to your credit report and be sent out along with it every time it is requested.

If you suspect someone has used your name, Social Security Number or driver's license to obtain credit, do not wait. Follow the steps below to make sure that your credit is still in tact and that it will be that way in the future.

• Contact the fraud departments of the three major credit bureaus: Equifax 1-800-685-1111, Experian 1-800-301-7195 and Trans Union 1-281-874-0169.
• Report identity theft crimes to the local police or law enforcement agency in your area.
• Put a fraud alert on your credit file. Also, report the possible theft to all credit card issuers. In addition, make sure to cancel all your current cards.
• Notify your bank of the theft. Request new account numbers and a new ATM number and PIN.
• Consider changing your driver's license number if you suspect someone has been using it to write bad checks.

Federal law has made it illegal to use an alternative social security number when applying for credit. By using another social security number and new identification you cause the credit bureaus to generate another report for a person that does not really exist, and then use that new report to obtain credit. One of the problems with this technique is that it requires that you lie on applications for credit, which in most states is a criminal offense.

Credit is the reputation you have earned for paying your bills on time that makes it possible for you to receive loans, etc. with the understanding that you will pay for them later.

If you are looking for a loan, credit card, or low interest rates, having good credit will increase your chances of getting one of these. If you have credit problems, it may be hard to acquire a loan when you need it the most.

The trick is to start small: try applying for credit with a local business, such as a department store, local bank or credit union. Before you apply for credit, you may want to make sure the creditor reports credit history information to one of the major U.S. credit bureaus so you can build your history. You may also want to apply for a credit card, use it once, pay the entire balance and then tear it up.

If you are having difficulty opening a credit account include asking a friend or family member to cosign your loan or credit card application. You may also want to apply for a secured card, which is guaranteed by a deposit you make to the card issuer.

In most states, creditors do not have to notify you before contacting the credit bureaus with a debt report.